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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 19, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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UNITED COMPANIES FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
LOUISIANA 71-0430414
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification Number)
organization)
</TABLE>
4041 ESSEN LANE
BATON ROUGE, LOUISIANA 70809
(504) 924-6007
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive offices)
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DALE E. REDMAN
CHIEF FINANCIAL OFFICER
4041 ESSEN LANE
BATON ROUGE, LOUISIANA 70809
(504) 924-6007
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copies to:
<TABLE>
<S> <C> <C>
REED D. AUERBACH, ESQ. LEE C. KANTROW, ESQ. PETER J. GORDON, ESQ.
STROOCK & STROOCK & LAVAN KANTROW, SPAHT, WEAVER & BLITZER SIMPSON THACHER & BARTLETT
SEVEN HANOVER SQUARE (A PROFESSIONAL LAW CORPORATION) 425 LEXINGTON AVENUE
NEW YORK, NEW YORK 10004-2696 POST OFFICE BOX 2997 NEW YORK, NEW YORK 10017-3909
BATON ROUGE, LOUISIANA 70821-2997
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE TO THE PUBLIC:
From time to time after the effective date of this Registration Statement.
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If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended, other than securities offered only in connection with dividend
or interest reinvestment plans, please check the following box. /X/
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
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If this form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
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If delivery of the prospectus is expected to be made pursuant to Rule 434
under the Securities Act, please check the following box. /X/
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CALCULATION OF REGISTRATION FEE
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PROPOSED
MAXIMUM
AGGREGATE AMOUNT OF
OFFERING REGISTRATION
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) FEE(2)
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<S> <C> <C>
Debt Securities(3); Preferred Stock; Common Stock(4)(5)........ $200,000,000 $68,965.52
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</TABLE>
(1) Estimated solely for purposes of computing the registration fee.
(2) The registration fee has been calculated in accordance with Rule 457(o)
under the Securities Act of 1933, as amended, and reflects the offering
price rather than the principal amount of any Debt Securities issued at a
discount.
(3) In addition to any Debt Securities that may be issued directly under this
registration statement, there are being registered hereunder an
indeterminate amount of Debt Securities as may be issued upon conversion or
exchange of Debt Securities or Preferred Stock, as the case may be. No
separate consideration will be received for any Debt Securities so issued
upon such conversion or exchange.
(4) There are being registered hereunder an indeterminate number of shares of
Common Stock as may be issued upon conversion or exchange of Debt Securities
or Preferred Stock, as the case may be. No separate consideration will be
received for any shares of Common Stock so issued upon such conversion or
exchange.
(5) Includes Preferred Stock Purchase Rights ("Rights"). The Rights are
associated with and trade with the Common Stock. The value, if any,
attributable to the Rights is reflected in the market price of the Common
Stock.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.
SUBJECT TO COMPLETION, DATED JUNE 19, 1995
PROSPECTUS
UNITED COMPANIES FINANCIAL CORPORATION
DEBT SECURITIES AND PREFERRED STOCK
United Companies Financial Corporation ("UCFC" or the "Company") may offer
from time to time, together or separately, (i) its unsecured debt securities,
which may be either senior (the "Senior Debt Securities") or subordinated (the
"Subordinated Debt Securities" and, together with the Senior Debt Securities,
the "Debt Securities"), and (ii) shares of its preferred stock, par value $2.00
per share (the "Preferred Stock"), (the Debt Securities and the Preferred Stock
are collectively referred to herein as the "Securities"), in amounts, at prices
and on terms to be determined at the time of the offering thereof. The
Subordinated Debt Securities and Preferred Stock may be convertible or
exchangeable into other series of Debt Securities or shares of the common stock,
par value $2.00 per share, of the Company (the "Common Stock"). The Securities
offered pursuant to this Prospectus may be issued in one or more series or
issuances the aggregate offering price of which will not exceed $200,000,000 (or
the equivalent thereof if the Debt Securities are denominated in one or more
foreign currencies or foreign currency units).
The specific terms of the Securities in respect of which this Prospectus is
being delivered (the "Offered Securities") will be set forth in an accompanying
supplement to this Prospectus (each, a "Prospectus Supplement"), including,
where applicable (i) in the case of Debt Securities, the specific designation,
aggregate principal amount, ranking as Senior Debt Securities or Subordinated
Debt Securities, authorized denominations, maturity, any premium, rate or method
of calculation of interest, if any, and dates for payment thereof, any terms for
optional or mandatory redemption, any sinking fund provisions, any terms for
conversion or exchange into other series of Debt Securities or Common Stock and
any other special terms, and (ii) in the case of the Preferred Stock, the
specific designation, the aggregate number of shares offered, the dividend rate
(or method of calculation thereof), the dividend period and dividend payment
dates, whether such dividends will be cumulative or noncumulative, the
liquidation preference, voting rights, if any, any terms for optional or
mandatory redemption, any terms for conversion or exchange into other series of
Debt Securities or Common Stock and any other special terms. If so specified in
the applicable Prospectus Supplement, Debt Securities of a series may be issued
in whole or in part in the form of one or more temporary or permanent global
securities.
The Senior Debt Securities will rank equally with all other unsubordinated
and unsecured indebtedness of the Company. The Subordinated Debt Securities will
be subordinate in right of payment to all existing and future Senior
Indebtedness (as defined herein) of the Company.
The Securities may be sold (i) through underwriting syndicates represented
by managing underwriters, or by underwriters without a syndicate, with such
underwriters to be designated at the time of sale; (ii) through agents
designated from time to time; or (iii) directly by the Company. The names of any
underwriters or agents of UCFC involved in the sale of the Securities, the
public offering price or purchase price thereof, any applicable commissions or
discounts, any other terms of the offering of such Securities and the net
proceeds to the Company from such sale, will be set forth in the applicable
Prospectus Supplement.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
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The date of this Prospectus is , 1995.
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THE ATTORNEY GENERAL OF THE STATE OF NEW YORK HAS NOT PASSED ON OR ENDORSED
THE MERITS OF THIS OFFERING. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
FOR NORTH CAROLINA INVESTORS: THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE COMMISSIONER OF INSURANCE FOR THE STATE OF NORTH CAROLINA
(THE "NORTH CAROLINA INSURANCE COMMISSIONER") NOR HAS THE NORTH CAROLINA
INSURANCE COMMISSIONER RULED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
LOUISIANA INSURANCE LAWS AND REGULATIONS PROVIDE THAT NO PERSON MAY ACQUIRE
CONTROL OF THE COMPANY AND THUS INDIRECT CONTROL OF ITS LOUISIANA DOMICILED
INSURANCE SUBSIDIARIES, UNITED COMPANIES LIFE INSURANCE COMPANY AND UNITED
GENERAL TITLE INSURANCE COMPANY, UNLESS SUCH PERSON HAS PROVIDED CERTAIN
REQUIRED INFORMATION TO THE INSURANCE COMMISSIONER OF THE STATE OF LOUISIANA AND
SUCH ACQUISITION HAS BEEN APPROVED BY THE INSURANCE COMMISSIONER OF THE STATE OF
LOUISIANA, AFTER PUBLIC HEARING. UNDER LOUISIANA INSURANCE LAWS AND REGULATIONS,
ANY PERSON WHO OWNS, CONTROLS OR HAS THE POWER TO VOTE 10% OR MORE OF THE VOTING
SECURITIES OF A CORPORATION IS PRESUMED TO HAVE CONTROL OF THAT CORPORATION AND
ITS SUBSIDIARIES. A SECURITY WHICH IS CONVERTIBLE INTO OR EVIDENCES A RIGHT TO
ACQUIRE A VOTING SECURITY IS VIEWED AS A VOTING SECURITY. CONSEQUENTLY, NO
PURCHASER IN THIS OFFERING MAY ACQUIRE, DIRECTLY OR INDIRECTLY, AN AMOUNT OF
VOTING SECURITY WHICH WOULD BRING SUCH PURCHASER'S TOTAL HOLDINGS TO 10% OR MORE
OF THE VOTING SECURITIES OF THE COMPANY, UNLESS SUCH PURCHASER HAS PROVIDED THE
REQUIRED INFORMATION TO THE INSURANCE COMMISSIONER OF THE STATE OF LOUISIANA AND
THE ACQUISITION HAS BEEN APPROVED BY THE INSURANCE COMMISSIONER OF THE STATE OF
LOUISIANA.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, previously filed by the Company with the
Securities and Exchange Commission (the "Commission") pursuant to the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), are incorporated herein
by reference:
(a) The Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended by Amendment No. 1 on Form 10-K/A;
(b) The Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995;
(c) The Company's Proxy Statement dated May 1, 1995 in connection with
the Company's Annual Meeting of Shareholders held on June 14, 1995;
(d) The Company's Current Report on Form 8-K filed on May 26, 1995;
(e) The Company's Registration Statement on Form 8-A filed on June 9,
1995;
(f) The description of the Company's Preferred Share Purchase Rights
contained in the Company's Registration Statement on Form 8-A filed on
August 5, 1994; and
(g) The Company's Current Report on Form 8-K filed on June 16, 1995.
All reports and any definitive proxy or information statements filed by the
Company with the Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act subsequent to the date of this Prospectus and prior to the
termination of the offering of the Securities offered hereby shall be deemed to
be incorporated by reference in this Prospectus and to be a part hereof from the
date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
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THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, ON THE WRITTEN OR ORAL REQUEST OF ANY SUCH PERSON, A
COPY OF ANY OR ALL OF THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS WHICH ARE NOT SPECIFICALLY INCORPORATED BY REFERENCE
IN SUCH DOCUMENTS). WRITTEN REQUESTS FOR SUCH COPIES SHOULD BE DIRECTED TO DALE
E. REDMAN, CHIEF FINANCIAL OFFICER, UNITED COMPANIES FINANCIAL CORPORATION, 4041
ESSEN LANE, BATON ROUGE, LOUISIANA 70809. TELEPHONE REQUESTS MAY BE DIRECTED TO
MR. REDMAN AT (504) 924-6007.
AVAILABLE INFORMATION
UCFC is subject to the informational requirements of the Exchange Act and,
in accordance therewith, files reports, proxy statements and other information
with the Commission. Such reports, proxy statements and other information can be
inspected and copied at the following public reference facilities maintained by
the Commission: Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549; Seven World Trade Center, Suite 1300, New York, New York 10048; and
the Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may also be obtained by mail from
the Public Reference Section of the Commission at Room 1024, Judiciary Plaza,
450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of prescribed
rates. In addition, reports, proxy statements and other information concerning
UCFC may be inspected at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
This Prospectus constitutes a part of a Registration Statement filed by the
Company with the Commission on Form S-3 under the Securities Act of 1933, as
amended (the "Securities Act"). This Prospectus omits certain of the information
contained in the Registration Statement, and reference is hereby made to the
Registration Statement and related exhibits for further information with respect
to the Company and the securities offered hereby. Statements contained herein
concerning the provisions of any document are not necessarily complete and, in
each instance, reference is made to the copy of such document filed as an
exhibit to the Registration Statement or otherwise filed with the Commission.
Each such statement is qualified in its entirety by such reference. These
documents may be inspected without charge at the office of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may
be obtained at fees and charges prescribed by the Commission.
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THE COMPANY
GENERAL
The Company, founded in 1946, is a financial services holding company
having mortgage and insurance operations. The Company's mortgage operations are
focused on the origination, sale and servicing of first mortgage,
non-conventional, home equity loans. Loan originations are accomplished
primarily through a retail branch network, which as of March 31, 1995, consisted
of 143 offices in 39 states, and a wholesale loan network of correspondents and
brokers. The Company's strategy for increasing loan production includes
continued geographic expansion, increased wholesale loan originations, loan
acquisitions and the introduction of new loan products. Home equity loan
production in 1994, 1993 and 1992 was $909 million, $540 million and $301
million, respectively. Home equity loan production for the first three months of
1995 was $309 million compared to $197 million for the same period of 1994. The
Company believes its loan securitizations improve its access to funding and
thereby provide a distribution outlet sufficient to meet the Company's expanded
home equity loan production. Increased loan production and its reduced cost of
funding are the primary reasons that operating income before income taxes of the
Company's mortgage operations rose to $81.2 million in 1994 from $46.3 million
in 1993 and from $24.0 million in 1992. Although loan sale gains increased from
$22.6 million for the first quarter of 1994 to $26.7 million for the same period
in 1995, the Company's operating income before income taxes of its mortgage
operations declined to $17.9 million for the first quarter of 1995 as compared
to $20.4 million for the first quarter of 1994, primarily as a result of
increased expenses relating to the expansion of its mortgage operations. The
Company's insurance operations sell primarily single premium deferred annuities
marketed in 47 states, the District of Columbia and Puerto Rico. For additional
information regarding the Company's operations by business segment, see
"Selected Financial and Other Data" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" herein and the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, as amended by
Amendment No. 1 on Form 10-K/A, and the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995.
The Company is incorporated in the State of Louisiana, its headquarters is
located at 4041 Essen Lane, Baton Rouge, Louisiana 70809, and its telephone
number is (504) 924-6007. As of March 31, 1995, the Company had approximately
1,550 employees.
MORTGAGE
United Companies Lending Corporation ("UC Lending" or "UCLC"), the
Company's wholly owned mortgage subsidiary, originates, sells and services
primarily first mortgage, non-conventional, home equity loans which are
typically not loans for the purchase of homes. These loans are made primarily to
individuals who may not otherwise qualify for conventional loans which are
readily marketable to government-sponsored mortgage agencies or conduits and
available through most commercial banks and many other lending institutions. The
weighted average interest rate and the weighted average loan origination fee on
UC Lending home equity loans originated during 1994 were 11.7% and 6.0%,
respectively, and for such loans originated during the first three months of
1995, were 12.4% and 5.2%, respectively. The Company attributes these loan terms
to its belief that its customers generally place a higher priority on the amount
of the monthly payment and prompt credit approval than on the interest rate and
origination fees associated with the loan. Further, borrowers of
non-conventional loans may present a greater credit risk and generally pay
higher interest rates and loan origination fees. Management of the Company
believes that any greater credit risk arising out of making loans to these
borrowers is compensated by higher fees and interest rates. The average home
equity loan amount at origination was approximately $41,000 during 1994, up from
$39,000 during 1993, and increased to $43,000 during the first three months of
1995. This increase has been due primarily to an expansion into geographic areas
where home values are higher, a de-emphasis of second mortgage loans, an
expansion of loan product lines and the introduction and growth of the wholesale
loan production programs. UC Lending originated $893 million of first mortgage
home equity loans in 1994, up 68% from $531 million in 1993 and originated $298
million of first mortgage home equity loans during the first three months of
1995 compared to $195 million for the same period of 1994. Loan originations are
accomplished primarily through a
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retail branch network in 39 states consisting of 143 offices as of March 31,
1995, and the wholesale loan network of correspondents and brokers. The
Company's strategy for increasing loan production includes continued geographic
expansion, increased wholesale originations, loan acquisitions and the
introduction of new loan products. In order to expand its distribution network,
during the third quarter of 1992, the Company initiated a wholesale loan network
of correspondents and brokers through a division of UC Lending operating under
the registered service mark UNICOR Mortgage(R), Inc. ("UNICOR"). The Company has
expanded this division which, as of March 31, 1995, was operating in 34 states.
The Company plans to further expand UNICOR on a selective basis into other
states. UNICOR offers fixed and adjustable rate home equity loans to borrowers
of a credit quality comparable to customers of UC Lending's branch network.
During late 1993, UC Lending began another wholesale loan network which offers
the same products as the UNICOR program to banks and other financial
institutions through its division that operates under the registered service
mark GINGER MAE(R), Inc. ("GINGER MAE"), the acronym for the Good Neighbor
Reinvestment Mortgage Assistance Loan Program. This program is intended to
permit participating institutions to originate loans to borrowers who do not
qualify for conventional credit. Loans purchased by UC Lending under this
program are underwritten by UC Lending personnel prior to approval and funding
under substantially the same guidelines as those utilized by UNICOR. As of March
31, 1995, GINGER MAE had 174 financial institutions in 16 states participating
in the GINGER MAE program. In August 1994, the Company incorporated two separate
subsidiaries, UNICOR Mortgage(R), Inc. and GINGER MAE(R), Inc., and intends to
commence operation of the wholesale division through these separate subsidiaries
during 1995.
The secondary mortgage market's growing acceptance of mortgage-backed
securities based on non-conventional home equity loans has allowed the Company
to pool large numbers of loans for sale as mortgage-backed securities. In late
1991 and in 1992, this was accomplished primarily through private placement
transactions. During 1993 and 1994, UC Lending sold publicly $451 million and
$973 million, respectively, of home equity loans through a Company-sponsored
shelf registration statement which was initially approved in 1993 for up to $1
billion principal amount of mortgage-backed securities and was amended in 1994
to cover an additional $3 billion principal amount of mortgage-backed
securities. The weighted average interest spread on loans sold to third parties
(the difference between the stated rate on the loan and the rate paid to
purchasers, less certain recurring fees) ranged from 4.56% in 1992 to 6.06% in
1993 to 4.49% in 1994 to 4.42% in the three months ended March 31, 1995. The
weighted average interest spread on loans sold is determined without regard to
expected credit losses. Therefore, the spread is not impacted by projected or
actual credit losses. The Company's securitization transactions are credit
enhanced and have received ratings of "Aaa" from Moody's Investors Service, Inc.
and "AAA" from Standard & Poor's Ratings Group, a division of McGraw-Hill, Inc.
("Standard & Poor's"). The Company presently intends to effect securitization
transactions on a quarterly basis, but the amount and timing of sales of
securities under the shelf registration statement will depend upon market and
other conditions affecting the operations of the Company. Servicing rights are
retained on substantially all loans sold, and as of March 31, 1995, UC Lending
serviced 56,625 home equity loans having an aggregate principal balance of
approximately $1.9 billion.
The ability of the Company to sell loans and/or mortgage-backed securities
in the secondary market is essential for continuation of the Company's loan
origination operations. A prolonged, substantial reduction in the size of the
secondary market for home equity loans may adversely affect the Company's
ability to sell its loan originations and/or mortgage-backed securities in the
secondary market with consequent adverse impact on the Company's profitability
and future originations. Moreover, market and other considerations could affect
the timing of the Company's securitization transactions and delays in such sales
could reduce the amount of gains recognized from the sale of loans in a given
quarter.
The Company derives a significant portion of its income by realizing gains
upon the sale of loans due to the excess servicing income of such loans. Excess
servicing income represents the excess of the interest rate payable by a
borrower on a loan over the interest rate passed through to the investor
acquiring an interest in such loan, less the Company's normal servicing fee and
other applicable recurring fees. When loans are sold, the Company recognizes as
current income the present value of the excess servicing income expected to be
realized over the anticipated average life of loans sold less future estimated
credit losses relating to the loans sold. At March 31, 1995, the Company's
balance sheet reflected capitalized excess servicing income of
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approximately $196 million and an allowance for loss on loans serviced of
approximately $29.6 million. The capitalized excess servicing income is computed
using prepayment, default and interest rate assumptions that the Company
believes market participants would use for similar instruments at the time of
sale. The weighted average discount rate used to determine the present value of
the balance of capitalized excess servicing income on home equity loans
reflected on the Company's balance sheet at March 31, 1995, was approximately
10%. The Company is not aware of an active market for this kind of receivable.
No assurance can be given that this receivable could in fact be sold at its
stated value on the balance sheet.
Capitalized excess servicing income is amortized over the lesser of the
estimated or actual remaining life of the underlying loans as an offset against
the excess servicing income component of servicing income actually received in
connection with such loans. Although management of the Company believes that it
has made reasonable estimates of the excess servicing income likely to be
realized, it should be recognized that the rate of prepayment and the amount of
defaults utilized by the Company are estimates and actual experience may vary
from these estimates. The Company periodically reviews its prepayment
assumptions in relation to current rates of prepayment and, if necessary, writes
down the remaining asset to the net present value of the estimated remaining
future excess servicing income. Rapid increases in interest rates or competitive
pressures may result in a reduction of excess servicing income, thereby reducing
the gains recognized by the Company upon the sale of loans in the future.
The gain recognized by the Company upon the sale of loans will have been
overstated if the excess servicing income actually received by the Company is
less than originally assumed. An acceleration of future prepayments could result
in capitalized excess servicing income amortization expense exceeding realized
excess servicing income, thereby adversely affecting the Company's servicing
income and resulting in a charge to earnings in the period of adjustment.
Likewise, if delinquencies or liquidations were to occur sooner in the portfolio
of loans sold by the Company and/or with greater frequency than was initially
assumed, capitalized excess servicing income amortization would occur more
quickly than originally anticipated, which would have an adverse effect on
servicing income in the period of such adjustment.
LIFE INSURANCE
United Companies Life Insurance Company ("UC Life" or "UCLIC"), the
Company's wholly owned life insurance company domiciled in Louisiana and
organized in 1955, is currently authorized to conduct business in 47 states, the
District of Columbia and Puerto Rico. The primary products of UC Life are
deferred annuities marketed on a commission basis principally through financial
institutions and independent general agents and are generally sold to middle
income customers seeking tax deferred insurance products, primarily to provide
savings for retirement. UC Life produced $250 million, $208 million and $48.6
million in sales of annuity products during the years ended December 31, 1994
and 1993 and in the three months ended March 31, 1995, respectively. At March
31, 1995, total annuity reserves were $1.4 billion. The Company intends to add
variable annuity products to its annuity line of business during 1995. UC Life
has also focused its efforts on improving the quality and liquidity of its
investment portfolio. At March 31, 1995, the invested assets of UC Life
consisted of $1.1 billion in investment grade fixed maturity securities (at
amortized cost), $152 million of residential first mortgage loans (which were
primarily originated by UC Lending) and $155 million of commercial mortgage
loans (also primarily originated by UC Lending). At March 31, 1995, the weighted
average rating of its publicly traded bond portfolio was "AA", the assets
allocated to investments in mortgage-backed securities were $789 million and the
amount of non-investment grade publicly traded bonds in the portfolio was $21.1
million or 1.8% of the portfolio. During the first three months of 1995 and
1994, the net interest spread on the Company's annuity business was 2.38%
compared to 2.61%, respectively.
Reserves for annuity policies constitute the Company's primary liabilities.
The duration of these liabilities is affected by a number of factors, including
interest rates, surrender penalties, ratings, public confidence in the insurance
industry generally and in the Company specifically, governmental regulations and
tax laws. Since insurance commissions incurred at the origination of annuity
policies are generally deferred and recognized over the estimated life of the
policies, any unexpected increase in surrenders of annuity contracts would
require more rapid recognition of these expenses, thereby adversely impacting
profitability.
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In June 1994, A.M. Best Company ("Best") reaffirmed its "A-" (Excellent)
rating of UC Life. Best's ratings depend in part on its analysis of an insurance
company's financial strength, operating performance and claims paying ability.
In addition, UC Life's claims paying ability has been rated "A+" by Duff &
Phelps, Inc. During 1994, Standard & Poor's revised the formula used in
assigning its qualified solvency ratings of insurance companies and, as a
result, revised its rating assigned to UC Life from "BBBq" to "BBq." The Company
believes that UC Life's ratings will enable it to continue to compete
successfully.
BUSINESS STRATEGIES
The Company's strategic plan focuses primarily on its continued emphasis on
its mortgage operations. Management of the Company believes that the
implementation of significant changes in mortgage operations, such as
centralization of collections and other loan servicing functions, institution of
a branch incentive compensation structure, the addition of the UNICOR and GINGER
MAE programs and potential new programs have positioned the Company to be able
to continue the increased loan production in its mortgage operations. The
Company's increased profitability has resulted primarily from its increased loan
origination capacity and its ability to more efficiently pool and sell loans in
the secondary market, principally through securitizations. Management of the
Company intends to continue to pursue the following strategies in its lending
operations:
- Continue to focus production on first mortgage non-conventional, home
equity loans and related products.
- Increase the number of retail branches and continue to expand
geographically.
- Continue to expand the product line and distribution channels.
- Maintain direct access to the asset-backed securities markets through
Company-sponsored conduits by means of its own shelf registration
statement.
As part of its business strategy, the Company continues to seek ways to
serve better its existing customer base and to broaden its customer base. To
that end, the Company has decided to commence a program for manufactured housing
loan products which will be conducted through a new subsidiary. The Company
continually evaluates the feasibility of introducing additional new loan
products, such as secured credit card loans. There can be no assurance that the
Company will introduce any other new loan products or that any new loan products
it may introduce will be successful. Neither the manufactured housing loan
products nor any other new loan product the Company may introduce is expected to
have a material effect on the Company's operations in 1995.
In addition to its lending strategy, the Company intends to focus its
insurance operations on developing the economies of scale necessary to compete
in the current annuity marketplace while maintaining an operating philosophy
which emphasizes investment grade securities, cost control and quality customer
service.
DISCONTINUED OPERATIONS
UG Title
On April 10, 1995, the Company made a decision to dispose of its investment
in United General Title Insurance Company ("UG Title"), a wholly owned
subsidiary of the Company, and, on May 1, 1995, approved a formal plan of
disposal. As a result, the operations of UG Title have been classified as
discontinued operations, and, accordingly, the consolidated financial statements
and the related notes of the Company segregate continuing and discontinued
operations. It is anticipated that the disposal will be completed during 1995.
In connection therewith, a letter of intent to sell UG Title has been
signed which provides for a reduction of the sale price for certain claims
relating to transactions occurring prior to the date of sale and discovered
within twelve months thereafter. The Company has estimated the risk of loss
related to such potential claims and recorded a provision for such loss in
connection with the disposition. Should such claims materially exceed the
Company's estimates for such losses, such consequence will have an adverse
impact on the Company's
7
<PAGE> 9
operations by reducing the proceeds to be received from the sale. The
transaction contemplated by the letter of intent is subject to negotiation and
execution of a definitive agreement and the satisfaction of certain conditions,
including receipt of necessary regulatory approvals. The Company believes that
the failure to consummate the transaction contemplated by the letter of intent
should not have a material adverse effect on the Company's financial condition.
In connection with the decision to dispose of UG Title, the Company
recorded a $128,000 after tax loss in its financial statements as of and for the
quarter ended March 31, 1995. Total revenues of UG Title for the three months
ended March 31, 1995 and 1994 were $9.0 million and $9.1 million, respectively,
and net income (loss) was $(373,000) and $233,000, respectively. Total assets of
UG Title at March 31, 1995 and December 31, 1994 were $16.0 million and $18.0
million, respectively.
UG Title was formed in 1983 to compliment the Company's mortgage
operations; however, underwriting of affiliated transactions represented less
than 3% of UG Title's business in 1994. At December 31, 1994, UG Title was
licensed in 28 states, was represented by approximately 880 independent general
agents and had no direct operations. Key markets for UG Title are Colorado,
Louisiana, Florida and California. During 1994 and 1993, title insurance
premiums were $44.7 million and $24.4 million, respectively. During 1994, UG
Title experienced a net loss of $5.0 million compared to net income of $0.8
million in 1993. Operations in 1994 suffered severely as the result of claims
related to agency escrow shortages in several states and losses associated with
a loan broker in California. In addition to the incurred losses, the
profitability of UG Title in 1994 was negatively impacted by a $3.8 million
increase in its reserve for policy losses.
UG Title provides single premium products insuring the validity of
residential first and second mortgage loans and indemnifying the policyholders
against loss or damage from obtaining an invalid title to real property. UG
Title focuses on underwriting title policies for resales and refinancings of
properties which policies averaged $80,100 in 1994. Risks in excess of $350,000
are reinsured primarily with Fidelity National Title Insurance Company; however,
UG Title remains contingently liable for reinsurance ceded. UG Title, unlike
some other title insurers, operates exclusively through independent title
agents.
Foster Mortgage Corporation
On May 7, 1993, the Company decided to divest its subsidiary Foster
Mortgage Corporation ("FMC"). As a result of this decision, the operations of
FMC have been classified as discontinued operations and, accordingly, the
consolidated financial statements of the Company and the related notes segregate
continuing and discontinued operations. In connection with the decision to
dispose of FMC, the Company recorded a $17.6 million after tax loss in its
financial statements as of and for the quarter ended March 31, 1993, reflecting
the operating loss of FMC for the quarter ended March 31, 1993 of $1.5 million,
net of tax benefit and the estimated loss from disposal of FMC of $16.1 million,
net of tax benefit. The Company has not reflected operating losses incurred by
FMC subsequent to that date in the Company's financial statements.
As of November 30, 1993, the servicing rights owned by FMC, which
constituted substantially all of its assets, were sold. On December 21, 1993,
the institutional lenders under FMC's primary credit facility (the "FMC
Institutional Lenders") filed a petition in the U.S. bankruptcy court to cause
the remaining affairs of FMC to be wound up under the supervision of the
bankruptcy court. The FMC Institutional Lenders filed and the bankruptcy court
has approved a plan of liquidation for FMC providing for the appointment of a
trustee selected by the FMC Institutional Lenders, disposal of FMC's remaining
assets, and distributions to FMC's creditors. The FMC Institutional Lenders
allege that FMC has certain claims against the Company, including a claim with
respect to the Company's alleged failure to remit all sums due FMC regarding
federal income taxes estimated by the FMC Institutional Lenders to range from
$2.1 million to $29 million. FMC and the Company executed, subject to the
approval of the bankruptcy court, a settlement agreement relating to payments
between FMC and the Company in connection with the federal income tax benefits
resulting from FMC's losses and to certain prior intercompany payments between
FMC and the Company. The settlement agreement included a release by FMC in favor
of the Company of any and all claims relating to federal income taxes. The FMC
Institutional Lenders opposed the proposed settlement agreement. At the
conclusion of a hearing on the proposed settlement on August 18, 1994, the
bankruptcy court approved the portion of the
8
<PAGE> 10
settlement providing for a net payment by the Company of $1.65 million to FMC in
satisfaction of the federal income tax benefits resulting from FMC's losses and
the release of any claims regarding federal income taxes. The Company had
previously recorded substantially all of the impact of this portion of the
settlement in its prior financial statements. The bankruptcy court declined to
approve the other portion of the proposed settlement relating to payments
received by the Company from FMC within twelve months of the bankruptcy filing.
These matters may be pursued by the trustee under the plan of liquidation
approved by the bankruptcy court. If the Company were required to refund such
payments, the Company has estimated the potential additional loss to be $1.9
million, net of tax benefits. The decision of the bankruptcy court on the
settlement is not final and was appealed by the FMC Institutional Lenders to the
U.S. District Court which affirmed the bankruptcy court's decision. The FMC
Institutional Lenders have appealed this decision to the United States Court of
Appeals for the Fifth Circuit. Management of the Company does not believe that
any additional amounts are owed by the Company to FMC and intends to vigorously
contest any claims which may be brought against it for such amounts.
The Company did not guarantee any debt of FMC and believes, based upon
advice of its counsel, that it has no responsibility for the obligations of FMC
under FMC's primary credit facility or (excluding potential consequences of the
bankruptcy filing on certain prior intercompany transactions or potential
additional payment for tax benefits as discussed above) for any other
liabilities to FMC's lenders.
GOVERNMENT REGULATION AND LEGISLATION; LEGAL PROCEEDINGS
The Company's mortgage and insurance businesses are subject to extensive
regulation, supervision and licensing by federal and state authorities.
Regulated matters include, without limitation, maximum interest rates and fees
which may be charged by the Company, disclosure in connection with loan
originations, credit reporting requirements, servicing requirements, insurance
premium rates and coverage issues, federal and state taxation, and multiple
qualification and licensing requirements for doing business in various
jurisdictions. While the Company believes that it maintains all requisite
licenses, permits and approvals and is in compliance in all material respects
with applicable federal and state regulations, there can be no assurance that
more restrictive laws or regulations will not be adopted which could make
compliance in the future more difficult and/or more expensive. Legislative and
regulatory proposals are frequently advanced which, if adopted, could adversely
affect the Company's profitability or the manner in which the Company conducts
its activities. In particular, amendments to the Federal Truth-in-Lending Act
(the "TILA") which may become effective on October 1, 1995, impose additional
disclosure requirements and prohibit certain prepayment penalty charges, among
other requirements, on loans with a specified level of origination fees or a
specified interest rate level. A significant percentage of the Company's loans
originated after the effective date could be subject to the requirements of this
legislation. The Company is currently reviewing this legislation in its final
form to determine the impact of its provisions on the Company's business or
results of operations.
On March 21, 1994, the United States Court of Appeals for the Eleventh
Circuit in Rodash v. AIB Mortgage Company, held, in part, that a lender
improperly disclosed the collection of the Florida state intangible tax from the
borrower, thereby subjecting the loan to rescission under the TILA by the
borrower for three years after it was made. Subsequent to the court's initial
decision and prior to its refusal to reconsider its decision, the Florida
legislature amended the language of the intangible tax to clarify the
legislature's previous intention that the intangible tax be disclosed for
purposes of the TILA in the manner that had been followed by most lenders in
Florida, including the Company. Although the Florida legislature intended this
legislation to apply retroactively, no final court decision has been rendered as
to the effect of this legislation on loans originated prior to its effective
date. This court decision may also apply to a similar intangible tax imposed by
other states. To its knowledge, as of June 15, 1995, no claims have been filed
against the Company under this court decision (other than as a defense in
foreclosure proceedings) and no notice of a breach of a representation has been
received under the Company's loan sale agreements requesting it to repurchase,
cure or substitute other loans for the loans sold. If the intent of the Florida
legislature is not upheld and if a substantial number of claims are filed by
borrowers against the Company resulting in rescission or repurchase, the
Company's financial statements and operations will be materially adversely
affected. As the financial
9
<PAGE> 11
impact, if any, of this contingency cannot presently be reasonably estimated,
the Company has made no accrual therefor.
A substantial amount of the Company's annuity policies are marketed through
financial institutions. In a recent decision, the United States Supreme Court
upheld the United States Comptroller of the Currency's decision to permit
national banks to sell annuities in towns with more than 5,000 inhabitants.
COMPETITION
As a marketer of credit and annuity products, the Company faces intense
competition. Traditional competitors in the financial services business include
other mortgage banking companies, commercial banks, credit unions, thrift
institutions, credit card issuers and finance companies. Competitors in the
annuity business include an increasing number of insurance companies which have
recently begun to offer annuity products. Many of these competitors in the
financial services and annuity business are substantially larger and have more
capital and other resources than the Company. Competition can take many forms
including convenience in obtaining a loan or annuity, customer service,
marketing and distribution channels and interest or crediting rates. In
addition, the current level of gains realized by the Company and its existing
competitors on the sale of its and their non-conventional loans could attract
additional competitors into this market with the possible effect of lowering
gains on future loan sales as the result of increased loan origination
competition.
USE OF PROCEEDS
Except as may otherwise be set forth in the applicable Prospectus
Supplement, the net proceeds from the sale of the Offered Securities will be
used for general corporate purposes.
10
<PAGE> 12
RATIOS OF EARNINGS
The following tables set forth the ratio of earnings to fixed charges and
the ratio of earnings to combined fixed charges and preferred stock dividends
for the Company for the three months ended March 31, 1995 and for each of the
years in the five-year period ended December 31, 1994.
The ratio of earnings to fixed charges has been computed by dividing
earnings by fixed charges. The ratio of earnings to combined fixed charges and
preferred stock dividends has been computed by dividing earnings by the sum of
fixed charges and preferred stock dividend requirements. Earnings consist of
income before income taxes plus fixed charges. Fixed charges consist of interest
on all indebtedness and the portion of rental expense considered to be
representative of interest.
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------------
1995 1994 1993 1992 1991 1990
- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.0 6.1 4.8 2.6 1.4 1.3
</TABLE>
RATIO OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED DECEMBER 31,
ENDED MARCH 31, ----------------------------------------
1995 1994 1993 1992 1991 1990
- --------------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
4.0 6.1 4.6 * 2.6 1.4 1.3
</TABLE>
- ---------------
* The Company had no preferred stock outstanding other than for a portion of the
year ended December 31, 1993. The preferred stock dividend declared during
such period has been increased to an amount representing the pre-tax earnings
which would be required to cover such dividend.
11
<PAGE> 13
SELECTED FINANCIAL AND OTHER DATA
The selected financial data set forth below are derived from the Company's
Consolidated Financial Statements. The Company's Consolidated Balance Sheets at
December 31, 1994 and 1993, and Consolidated Statements of Income, Stockholders'
Equity and Cash Flows for the years ended December 31, 1994, 1993 and 1992 and
notes thereto were audited by Deloitte & Touche LLP, independent certified
public accountants, and are incorporated by reference herein and available as
described under "Incorporation of Certain Documents by Reference" and "Available
Information." The Company's Consolidated Financial Statements should be read in
conjunction with this table and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994, as amended by
Amendment No. 1 on Form 10-K/A. The financial information and other data set
forth for the three months ended March 31, 1995 and 1994 are unaudited; however,
in the opinion of the Company's management, the accompanying financial
information contains all adjustments, consisting only of normal accruals, except
for discontinued operations, necessary to present fairly the financial
information for such periods. The results of operations for the three months
ended March 31, 1995 may not be indicative of results of operations to be
expected for the full year.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,(1) YEAR ENDED DECEMBER 31,(1)
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Interest, charges and fees on
loans.............................. $ 30,788 $ 27,285 $ 116,747 $ 96,284 $ 92,785 $ 90,180 $ 63,300
Loan sale gains...................... 26,734 22,554 86,735 59,441 33,475 29,627 18,613
Investment income.................... 25,011 18,221 84,666 75,527 65,548 61,828 65,349
Loan servicing income................ 3,484 3,689 15,173 10,077 10,611 9,492 10,592
Net insurance premiums............... 2,102 3,068 11,373 18,684 22,860 36,269 39,820
---------- ---------- ---------- ---------- ---------- ---------- ----------
Total revenues....................... 88,119 74,817 314,694 260,013 225,279 227,396 197,674
Total expenses....................... 68,570 53,985 230,620 216,952 204,664 219,580 190,837
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations
before income taxes................ 19,549 20,832 84,074 43,061 20,615 7,816 6,837
Provision for income taxes........... 6,725 7,355 29,492 14,744 7,601 3,164 2,473
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income from continuing operations.... 12,824 13,477 54,582 28,317 13,014 4,652 4,364
Income (loss) from discontinued
operations......................... (128) 233 (5,048) (16,742) (2,768) 6,824 3,943
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ 12,696 $ 13,710 $ 49,534 $ 11,575 $ 10,246 $ 11,476 $ 8,307
========== ========== ========== ========== ========== ========== ==========
PER SHARE DATA(2):
Primary:
Income from continuing
operations....................... $ .91 $ .93 $ 3.83 $ 2.52 $ 1.31 $ .47 $ .44
Income (loss) from discontinued
operations....................... (.01) .02 (.35) (1.51) (.28) .69 .40
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ .90 $ .95 $ 3.48 $ 1.01 $ 1.03 $ 1.16 $ .84
========== ========== ========== ========== ========== ========== ==========
Fully diluted:
Income from continuing
operations....................... $ .91 $ .93 $ 3.83 $ 2.38 $ 1.31 $ .47 $ .44
Income (loss) from discontinued
operations....................... (.01) .02 (.35) (1.41) (.28) .69 .40
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income......................... $ .90 $ .95 $ 3.48 $ .97 $ 1.03 $ 1.16 $ .84
========== ========== ========== ========== ========== ========== ==========
Weighted average shares outstanding:
Primary............................ 14,081 14,402 14,245 11,104 9,917 9,883 9,832
Fully Diluted...................... 14,123 14,402 14,245 11,853 9,917 9,883 9,832
Cash dividends....................... $ .1000 $ .0909 $ .3636 $ .3092 $ .2728 $ .2556 $ .2372
Stockholders' equity -- period
end(3)............................. $ 13.96 $ 11.89 $ 11.34 $ 11.45 $ 9.70 $ 8.94 $ 8.08
</TABLE>
12
<PAGE> 14
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,(1) YEAR ENDED DECEMBER 31,(1)
----------------------- --------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
---------- ---------- ---------- ---------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA -- PERIOD END:
Investment securities -- net(3)...... $1,142,954 $ 961,672 $1,044,842 $ 902,091 $ 759,354 $ 376,966 $ 588,397
Loans -- net......................... 394,362 494,723 369,382 517,720 502,229 604,942 362,164
Capitalized excess servicing
income............................. 195,609 131,611 179,065 113,192 72,062 53,942 47,153
Deferred policy acquisition costs.... 92,802 83,584 91,915 83,495 80,007 78,599 77,601
Total assets......................... 2,087,806 1,863,915 1,978,255 1,817,153 1,627,900 1,492,816 1,363,955
Annuity reserves..................... 1,440,233 1,317,878 1,425,973 1,294,983 1,147,555 1,014,649 875,346
Notes payable........................ 240,342 180,950 213,668 155,500 206,850 200,447 216,971
Total liabilities.................... 1,893,914 1,702,254 1,823,005 1,663,785 1,531,642 1,404,382 1,284,524
Stockholders' equity(3).............. 193,892 161,661 155,250 153,368 96,258 88,434 79,430
OTHER DATA:
Mortgage
Total loan originations............ $ 309,564 $ 197,357 $ 913,319 $ 545,229 $ 321,198 $ 328,184 $ 397,794
Home equity loan originations...... 309,290 197,329 908,821 539,868 301,234 253,613 224,783
Average home equity loan size...... 43 43 41 39 28 24 23
Home equity loans
serviced -- period end........... 1,895,955 1,248,424 1,683,698 1,125,139 819,448 703,922 575,282
Total loans serviced -- period
end.............................. 2,234,232 1,668,714 2,032,405 1,568,781 1,367,822 1,344,388 1,175,038
Average coupon on home equity loans
originated....................... 12.4% 11.0% 11.7% 11.8% 13.4% N/A N/A
Loan origination fees as % of home
equity loans..................... 5.2% 6.0% 6.0% 7.0% 7.9% 8.2% 7.9%
Weighted average interest spread
retained on home equity loans
sold............................. 4.42% 5.61% 4.49% 6.06% 4.56% 4.42% 4.01%
Life Insurance
Annuity sales...................... $ 48,563 $ 45,029 $ 249,737 $ 207,682 $ 187,050 $ 175,796 $ 102,391
Net interest spread on annuities... 2.38% 2.61% 2.73% 2.20% 1.84% 1.88% 2.18%
Investment grade bonds as % of
invested assets.................. 72.0% 64.3% 69.6% 59.6% 54.3% 25.1% 45.5%
</TABLE>
- ---------------
(1) On April 10, 1995, the Company decided to dispose of its investment in its
wholly owned subsidiary, UG Title, and on May 1, 1995, approved a formal
plan of disposal of UG Title. In addition, on May 7, 1993, the Company
announced its decision to dispose of the net assets and operations of FMC, a
wholly owned subsidiary of the Company. The operations of UG Title and FMC
have been reclassified as discontinued operations and the prior years'
financial statements of the Company included herewith have been reclassified
accordingly.
(2) All share and per share data have been adjusted to reflect stock dividends.
(3) During the first quarter of 1994, the Company implemented the provisions of
FASB Statement of Financial Accounting Standards No. 115 ("SFAS 115"), which
revised the method of accounting for certain of the Company's investments.
Prior to adoption of SFAS 115, the Company reported its investments in fixed
income investments at amortized cost, adjusted for declines in value
considered to be other than temporary. SFAS 115 requires the classification
of securities in one of three categories: "available-for-sale",
"held-to-maturity" or "trading securities." Securities classified as
held-to-maturity are carried at amortized cost, whereas securities
classified as trading securities or available-for-sale are recorded at fair
value. Effective with the adoption of SFAS 115, the Company determined the
appropriate classification of its investments and, if necessary, adjusted
the carrying value of such securities accordingly as if the unrealized gains
or losses had been realized. The adjustment, net of applicable income taxes,
for investments classified as available-for-sale is recorded in "Net
unrealized loss on securities" and is included in Stockholders' equity. In
accordance with the provisions of SFAS 115, prior year investments were not
restated.
13
<PAGE> 15
SELECTED FINANCIAL INFORMATION BY SEGMENT
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------ --------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------- ------- -------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
MORTGAGE
Interest, charges and fees on loans......... $20,140 $14,798 $ 68,658 $ 44,797 $ 35,003 $ 36,174 $ 33,029
Investment income........................... 1,465 266 2,762 1,054 696 1,137 --
Loan sale gains............................. 26,734 22,554 86,289 59,220 29,679 15,571 14,636
Loan servicing income....................... 4,734 4,977 19,892 15,568 15,284 12,108 10,289
------- ------- -------- -------- -------- -------- --------
Total revenues.............................. 53,073 42,595 177,601 120,639 80,662 64,990 57,954
Total expenses.............................. 35,170 22,244 96,446 74,344 56,661 60,592 54,406
------- ------- -------- -------- -------- -------- --------
Income from continuing operations before
income taxes.............................. 17,903 20,351 81,155 46,295 24,001 4,398 3,548
------- ------- -------- -------- -------- -------- --------
LIFE INSURANCE
Interest, charges and fees on loans......... 9,267 11,577 43,647 45,561 51,396 51,585 32,399
Investment income........................... 24,145 18,313 83,614 75,594 67,287 63,285 65,549
Net insurance premiums...................... 2,102 3,068 11,373 18,684 22,860 36,269 39,820
Loan sale gains............................. -- -- -- -- 3,310 -- 3,977
Loan servicing income (loss)................ (427) (44) (505) 340 673 1,645 2,625
------- ------- -------- -------- -------- -------- --------
Total revenues.............................. 35,087 32,914 138,129 140,179 145,526 152,784 144,370
Total expenses.............................. 31,918 31,335 129,049 137,544 140,061 150,707 131,216
------- ------- -------- -------- -------- -------- --------
Income from continuing operations before
income taxes.............................. 3,169 1,579 9,080 2,635 5,465 2,077 13,154
------- ------- -------- -------- -------- -------- --------
CORPORATE, OTHER OPERATIONS AND ELIMINATIONS
Income (loss) from continuing operations
before income taxes....................... (1,523) (1,098) (6,161) (5,869) (8,851) 1,341 (9,865)
------- ------- -------- -------- -------- -------- --------
CONSOLIDATED
Income from continuing operations before
income taxes.............................. 19,549 20,832 84,074 43,061 20,615 7,816 6,837
Provision for income taxes.................. 6,725 7,355 29,492 14,744 7,601 3,164 2,473
------- ------- -------- -------- -------- -------- --------
Income from continuing operations........... 12,824 13,477 54,582 28,317 13,014 4,652 4,364
Income (loss) from discontinued
operations................................ (128) 233 (5,048) (16,742) (2,768) 6,824 3,943
------- ------- -------- -------- -------- -------- --------
Net income.................................. $12,696 $13,710 $ 49,534 $ 11,575 $ 10,246 $ 11,476 $ 8,307
======= ======= ======== ======== ======== ======== ========
</TABLE>
14
<PAGE> 16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following analysis should be read in conjunction with the Company's
Consolidated Financial Statements and accompanying Notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained in the Company's Annual Report on Form 10-K for the year ended
December 31, 1994, as amended by Amendment No. 1 on Form 10-K/A, and the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.
See "Incorporation of Certain Documents by Reference" and "Available
Information."
OVERVIEW
The table below sets forth income from continuing operations before income
taxes for each of the Company's business segments and certain home equity loan
data for the indicated periods:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
-------------------- --------------------------------
1995 1994 1994 1993 1992
-------- -------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Mortgage................................ $ 17,903 $ 20,351 $ 81,155 $ 46,295 $ 24,001
Life Insurance.......................... 3,169 1,579 9,080 2,635 5,465
Corporate, other operations and
eliminations.......................... (1,523) (1,098) (6,161) (5,869) (8,851)
-------- -------- -------- -------- --------
Total......................... $ 19,549 $ 20,832 $ 84,074 $ 43,061 $ 20,615
======== ======== ======== ======== ========
Home equity loan originations........... $309,290 $197,329 $908,821 $539,868 $301,234
Home equity loans sold.................. 274,653 198,332 977,653 462,873 271,920
Interest spread retained on home equity
loans sold............................ 4.42% 5.61% 4.49% 6.06% 4.56%
</TABLE>
The following summary identifies the major factors which influenced the
results of operations of the Company's primary operating divisions during the
indicated periods.
MORTGAGE
The Company's mortgage operations primarily consist of the origination,
sale and servicing of first mortgage, non-conventional, home equity loans.
Fundamental to the profitability and funding of the Company's mortgage
operations is the sale of these loans with servicing rights retained. The
majority of the revenue of the mortgage segment is derived from gain recognized
on the sale of loans and the recognition of net loan fees at the time of sale of
the loans. Net loan fees on loans owned by the Company are recognized over the
lives of the loans.
Prior to 1991, the Company had either held the home equity loans it
originated in its own portfolio or sold them to financial institutions. Since
the fourth quarter of 1991, however, the secondary mortgage market's growing
acceptance of mortgage-backed securities based on non-conventional home equity
loans has allowed the Company to pool large numbers of loans for sale as
mortgage-backed securities. In late 1991 and 1992, this was accomplished
primarily through private placement transactions. In 1993, the Company began
selling its loans in public securitization transactions through its own shelf
registration statement and sold publicly $973 million and $451 million of home
equity loans during 1994 and 1993, respectively.
The Company's mortgage operations are interest rate sensitive and,
therefore, fluctuations in and the level of interest rates can have a variety of
effects on the Company's profitability. In particular, significant changes in
interest rates may impact the volume of loan originations, and will influence
the funding costs of such originations and the amount of gain recognized on
loans sold in the secondary market. During periods of declining interest rates
the mortgage operations will generally experience an increase in profitability
as the interest spread should widen both on loans held by the Company as an
investment and on loans sold in the secondary market.
15
<PAGE> 17
Although loan sale gains increased from $22.6 million for the first quarter
of 1994 to $26.7 million for the same period in 1995, the Company's operating
income before income taxes of its mortgage operations declined to $17.9 million
for the first quarter of 1995 as compared to $20.4 million for the first quarter
of 1994, primarily as a result of increased expenses relating to the expansion
of its mortgage operations. During 1993, the positive effect on income of the
mortgage operations resulted primarily from a wider interest margin retained on
loans sold and a lower cost of funding loan originations than experienced in
1992 or 1994. The weighted average interest spread on loans sold to third
parties (the difference between the stated rate on the loan and the rate paid to
purchasers, less recurring fees) increased from 4.56% in 1992 to 6.06% in 1993
and declined to 4.49% in 1994 due to a rising interest rate environment. This
spread was 4.42% for the first quarter of 1995 compared to 5.16% for the first
quarter of 1994, the reduction due primarily to the higher market interest rates
during the first quarter of 1995. The weighted average interest spread on loans
sold is determined without regard to credit losses. Therefore, the spread is not
impacted by projected or actual credit losses. The lower interest spread on
loans sold during 1994 and the first quarter of 1995 was somewhat offset by an
increased volume of loans originated and sold. In 1994, $909 million of home
equity loans were originated and $978 million were sold to third parties
compared to $540 million originated and $463 million sold to third parties in
1993. In the first three months of 1995, $309 million of home equity loans were
originated and $275 million were sold to third parties compared to $197 million
originated and $198 million sold to third parties in the first three months of
1994.
Although historically a lower interest rate environment has not resulted in
a significant increase in the level of prepayment of loans originated and
serviced by the Company, a significant and sustained reduction in interest rates
could cause prepayments to increase, and thereby result in a contraction of the
amount of loans owned and serviced and an accelerated amortization of
capitalized excess servicing income. Increased prepayments reduce the time
period during which the Company receives excess servicing income and other
servicing income with respect to prepaid loans. Increased amortization of
capitalized excess servicing income is a current charge to earnings. Likewise,
if delinquencies or liquidations were to occur sooner in the portfolio of loans
sold by the Company and/or with greater frequency than was initially assumed,
capitalized excess servicing income amortization would occur more quickly than
originally anticipated, which would have an adverse effect on servicing income
in the period of such adjustment. In contrast, an increase in the level of
interest rates for an extended period of time could adversely affect the ability
of the Company to originate loans, as well as the profitability of the loan
origination program, by increasing the cost of funding and reducing the interest
spread on loans retained and loans sold. If actual prepayments with respect to
loans sold occur more slowly than estimated at the time of sale, total income
would exceed previously estimated amounts; however, no adjustments would be made
to capitalized excess servicing income on the Company's consolidated balance
sheet as such income would be recognized prospectively.
LIFE INSURANCE
UC Life has focused its efforts on increased annuity sales by expanding its
distribution network of financial institutions and independent general agents.
In 1994, annuity sales were $250 million, the largest annual production since
1982. Annuity sales for the first quarter of 1995 were $48.6 million compared to
$45.0 million for the first quarter of 1994. UC Life focused in 1994 on
expanding the independent general agents share of its distribution network,
which agents sold approximately 46% of the total dollar amount of annuities
written in 1994 compared to 30% in 1993. As with the Company's mortgage
operation, fluctuations in and the level of interest rates also impacts the
operations of UC Life. The average spread on the annuity business was 1.84% in
1992 and increased to 2.20% and to 2.73% during 1993 and 1994, respectively.
This spread declined to 2.38% during the first quarter of 1995. Surrenders of
annuity policies increased in 1994 compared to prior years and in the first
quarter of 1995 compared to the first quarter of 1994 due in part to the
reduction in interest rates on new and existing annuity contracts and to a
rising interest rate environment and an increase in the number of annuity
contracts which were beyond the surrender penalty period.
UC Life has continued its efforts to improve the quality and liquidity of
its investment portfolio. At March 31, 1995, the weighted average rating of the
publicly traded bond portfolio was "AA", the amortized cost of assets allocated
to investments in investment grade fixed maturity securities was $337 million or
29.4%
16
<PAGE> 18
of the portfolio and in investment grade mortgage-backed securities was $789
million or 68.8% of the portfolio. At March 31, 1995, the amortized cost of UC
Life's holdings of non-investment grade publicly traded bonds was $21.1 million
or 1.8% of the portfolio. UC Life's invested assets also include residential and
commercial real estate mortgages originated and serviced by UC Lending; however,
the percentage of assets invested in mortgage loans in recent years has been
reduced primarily as the result of their disfavor with insurance regulatory
authorities and rating agencies.
The annuities sold by UC Life are monetary in nature and therefore
sensitive to changes in the interest rate environment. Profitability of UC Life
is directly affected by its ability to invest annuity premiums at yields above
the interest crediting rates on the related policy liabilities. One of the
primary financial objectives of UC Life is to effectively manage this interest
spread over time in changing interest rate environments. This is accomplished in
part by adjusting the interest crediting rate paid on its existing and new
annuity policies. During periods of declining interest rates, the fair value of
UC Life's investments, primarily fixed maturity investments, increases; however,
yields earned on investments made during such periods decline. In contrast,
during periods of rising interest rates the fair value of the investment
portfolio declines and the risk of policy surrenders increases. An unanticipated
increase in surrenders would impact the Company's liquidity, potentially
requiring the sale of certain investments prior to their maturities, which may
be at a loss.
Reserves for annuity policies constitute the Company's primary liabilities.
The duration of these liabilities is affected by a number of factors, including
interest rates, surrender penalties, ratings, public confidence in the insurance
industry generally and in UC Life specifically, governmental regulations and tax
laws. Since insurance commissions incurred at the origination of annuity
policies are generally deferred and recognized over the estimated life of the
policies, any unexpected increase in surrenders of annuity contracts would
require more rapid recognition of these expenses, thereby adversely impacting
profitability.
DISCONTINUED OPERATIONS
UG Title
On April 10, 1995, the Company made a decision to dispose of its investment
in UG Title, a wholly owned subsidiary of the Company, and, on May 1, 1995,
approved a formal plan of disposal. As a result, the operations of UG Title have
been classified as discontinued operations, and, accordingly, the consolidated
financial statements and the related notes of the Company segregate continuing
and discontinued operations. It is anticipated that the disposal will be
completed during 1995.
In connection therewith, a letter of intent to sell UG Title has been
signed which provides for a reduction of the sale price for certain claims
relating to transactions occurring prior to the date of sale and discovered
within twelve months thereafter. The Company has estimated the risk of loss
related to such potential claims and recorded a provision for such loss in
connection with the disposition. Should such claims materially exceed the
Company's estimates for such losses, such consequence will have an adverse
impact on the Company's operations by reducing the proceeds to be received from
the sale. The transaction contemplated by the letter of intent is subject to
negotiation and execution of a definite agreement and the satisfaction of
certain conditions, including receipt of necessary regulatory approvals. The
Company believes that the failure to consummate the transaction contemplated by
the letter of intent should not have a material adverse effect on the Company's
financial condition.
In connection with the decision to dispose of UG Title, the Company
recorded a $128,000 after tax loss in its financial statements as of and for the
quarter ended March 31, 1995. Total revenues of UG Title for the three months
ended March 31, 1995 and 1994 were $9.0 million and $9.1 million, respectively,
and net income (loss) was $(373,000) and $233,000, respectively. Total assets of
UG Title at March 31, 1995 and December 31, 1994 were $16.0 million and $18.0
million, respectively.
UG Title was formed in 1983 to compliment the Company's mortgage
operations; however, underwriting of affiliated transactions represented less
than 3% of UG Title's business in 1994. At December 31, 1994, UG Title was
licensed in 28 states, was represented by approximately 880 independent general
agents and had no direct operations. Key markets for UG Title are Colorado,
Louisiana, Florida and California. During 1994
17
<PAGE> 19
and 1993, title insurance premiums were $44.7 million and $24.4 million,
respectively. During 1994, UG Title experienced a net loss of $5.0 million
compared to net income of $0.8 million in 1993. Operations in 1994 suffered
severely as the result of claims related to agency escrow shortages in several
states and losses associated with a loan broker in California. In addition to
the incurred losses, the profitability of UG Title in 1994 was negatively
impacted by a $3.8 million increase in its reserve for policy losses.
UG Title provides single premium products insuring the validity of
residential first and second mortgage loans and indemnifying the policyholders
against loss or damage from obtaining an invalid title to real property. UG
Title focuses on underwriting title policies for resales and refinancings of
properties which policies averaged $80,100 in 1994. Risks in excess of $350,000
are reinsured primarily with Fidelity National Title Insurance Company; however,
UG Title remains contingently liable for reinsurance ceded. UG Title, unlike
some other title insurers, operates exclusively through independent title
agents.
FMC
On May 7, 1993, the Company decided to divest its subsidiary FMC. As a
result of this decision, the operations of FMC have been classified as
discontinued operations, and, accordingly, the consolidated financial statements
of the Company and the related notes segregate continuing and discontinued
operations. In connection with the decision to dispose of FMC, the Company
recorded a $17.6 million after tax loss in its financial statements as of and
for the quarter ended March 31, 1993, reflecting the operating loss of FMC for
the quarter ended March 31, 1993 of $1.5 million, net of tax benefit and the
estimated loss from disposal of FMC of $16.1 million, net of tax benefit. The
Company has not reflected operating losses incurred by FMC subsequent to that
date in the Company's financial statements.
As of November 30, 1993, the servicing rights owned by FMC, which
constituted substantially all of its assets, were sold. On December 21, 1993,
the FMC Institutional Lenders filed a petition in the U.S. bankruptcy court to
cause the remaining affairs of FMC to be wound up under the supervision of the
bankruptcy court. The FMC Institutional Lenders filed and the bankruptcy court
has approved a plan of liquidation for FMC providing for the appointment of a
trustee selected by the FMC Institutional Lenders, disposal of FMC's remaining
assets, and distributions to FMC's creditors. The FMC Institutional Lenders
allege that FMC has certain claims against the Company, including a claim with
respect to the Company's alleged failure to remit all sums due FMC regarding
federal income taxes estimated by the FMC Institutional Lenders to range from
$2.1 million to $29 million. FMC and the Company executed, subject to the
approval of the bankruptcy court, a settlement agreement relating to payments
between FMC and the Company in connection with the federal income tax benefits
resulting from FMC's losses and to certain prior intercompany payments between
FMC and the Company. The settlement agreement included a release by FMC in favor
of the Company of any and all claims relating to federal income taxes. The FMC
Institutional Lenders opposed the proposed settlement agreement. At the
conclusion of a hearing on the proposed settlement on August 18, 1994, the
bankruptcy court approved the portion of the settlement providing for a net
payment by the Company of $1.65 million to FMC in satisfaction of the federal
income tax benefits resulting from FMC's losses and the release of any claims
regarding federal income taxes. The Company had previously recorded
substantially all of the impact of this portion of the settlement in its prior
financial statements. The bankruptcy court declined to approve the other portion
of the proposed settlement relating to payments received by the Company from FMC
within twelve months of the bankruptcy filing. These matters may be pursued by
the trustee under the plan of liquidation approved by the bankruptcy court. If
the Company were required to refund such payments, the Company has estimated the
potential additional loss to be $1.9 million, net of tax benefits. The decision
of the bankruptcy court on the settlement is not final and was appealed by the
FMC Institutional Lenders to the U.S. District Court which affirmed the
bankruptcy court's decision. The FMC Institutional Lenders have appealed this
decision to the United States Court of Appeals for the Fifth Circuit. Management
of the Company does not believe that any additional amounts are owed by the
Company to FMC and intends to vigorously contest any claims which may be brought
against it for such amounts.
The Company did not guarantee any debt of FMC and believes, based upon
advice of its counsel, that it has no responsibility for the obligations of FMC
under FMC's primary credit facility or (excluding potential
18
<PAGE> 20
consequences of the bankruptcy filing on certain prior intercompany transactions
or potential additional payment for tax benefits as discussed above) for any
other liabilities to FMC's lenders.
RESULTS OF OPERATIONS
The Company's consolidated financial statements present UG Title and FMC as
discontinued operations. Discussed below are results of continuing operations
for the periods presented.
THREE MONTHS ENDED MARCH 31, 1995 COMPARED TO THREE MONTHS ENDED MARCH 31, 1994
Income from continuing operations for the first quarter of 1995 was $12.8
million ($.91 per share based on 14.1 million weighted average shares
outstanding) compared to net income of $13.5 million ($.93 per share based on
14.4 million shares outstanding) for the same period of 1994. In comparison to
the 1994 period, the decline in income in 1995 was primarily the result of costs
of expanding the Company's mortgage operations. Personnel costs in the Company's
mortgage division increased approximately $3.9 million as the average number of
employees in the unit increased by approximately 300 from the first quarter of
1994 to the same period of 1995. In addition, advertising expenses increased
approximately $2.0 million and occupancy costs of the mortgage operations
increased approximately $.6 million as the result of an increase in the number
of retail branches from 125 at March 31, 1994 to 143 at March 31, 1995. The
negative effect on income of these increased expense items was offset to some
extent by a $76 million increase in the amount of loans sold, which resulted in
an increase in loan sale gains from $22.6 million for the first quarter of 1994
to $26.7 million for the same period in 1995.
The following table sets forth certain financial data for the periods
indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Total revenues.................................................... $88,119 $74,817
Total expenses.................................................... 68,570 53,985
Income from continuing operations before income taxes............. 19,549 20,832
Income from continuing operations................................. 12,824 13,477
</TABLE>
Revenues. The following table sets forth information regarding the
components of the Company's revenues for the three months ended March 31, 1995
and 1994.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest, charges and fees on loans............................... $30,788 $27,285
Loan sale gains................................................... 26,734 22,554
Investment income................................................. 25,011 18,221
Loan servicing income............................................. 3,484 3,689
Net insurance premiums............................................ 2,102 3,068
------- -------
Total................................................... $88,119 $74,817
======= =======
</TABLE>
Interest, charges and fees on loans increased $3.5 million for the first
three months of 1995 compared to the same period of 1994. This line item
includes interest on mortgage loans owned by the mortgage and life insurance
divisions and loan origination fees earned by the mortgage division. Loan
origination fees in excess of direct origination costs on loans held by the
Company are recognized over the life of the loan and are recognized at the time
of sale on loans sold to third parties. During the three months ended March 31,
1995 and 1994, the Company sold approximately $275 million and $198 million,
respectively, in home equity loans and recognized approximately $8.2 million and
$7.0 million, respectively, in net loan origination fees in connection with
these sales. Other loan income includes primarily prepayment fees, late charges,
and insurance commissions.
19
<PAGE> 21
The following table presents the composition of interest, charges and fees
on loans for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Loan origination fees............................................. $15,502 $12,465
Mortgage loan interest............................................ 10,650 11,258
Other loan income................................................. 4,636 3,562
------- -------
Total................................................... $30,788 $27,285
======= =======
</TABLE>
The Company estimates that non-accrual loans reduced mortgage loan interest
for the first three months of 1995 and 1994 by approximately $2.9 million and
$2.5 million, respectively. During the three months ended March 31, 1995 the
average amount of non-accrual loans owned by the Company was $21.5 million
compared to approximately $28.7 million during the same period of 1994. In
addition, the average balance of loans serviced for third parties which were on
a non-accrual basis or in foreclosure was $69.3 million and $50.8 million during
the first three months of 1995 and 1994, respectively, representing 3.9% and
4.5%, respectively, of the average amount of loans serviced for third parties.
The Company is generally obligated to advance interest on delinquent loans which
have been sold until satisfaction of the note, liquidation of the collateral or
charge off of the delinquent loan. At March 31, 1995, the Company owned
approximately $10.5 million of commercial loans which were on an accrual status,
but which the Company considers as potential problem loans, compared to $8.2
million at March 31, 1994. The Company evaluates each of these commercial loans
to estimate its risk of loss in the investment and provides for such loss
through a charge to earnings.
Loan sale gains increased $4.2 million during the first three months of
1995 over the same period in 1994. Loan sale gains approximate the present value
over the estimated lives of the loans of the excess of the contractual rates on
the loans sold, over the sum of the pass-through rate paid to the buyer, a
normal servicing fee, a trustee fee, a surety bond fee, if any, in
mortgage-backed securitization transactions, and an estimate of future credit
losses. The increase in the amount of loan sale gains was due primarily to a $76
million increase in the amount of loans sold which offset a decline in excess
servicing income retained by the Company (i.e., the stated interest rate on the
loan less the pass-through rate and the normal servicing fee and other
applicable recurring fees). Interest spread retained by the Company on loans
sold includes the normal servicing fee. During 1994, guidelines were published
by Standard & Poor's defining a normal servicing fee as 50 basis points for
servicing "B" and "C" quality home equity loans, such as those originated by the
Company. As the result of this industry data, the servicing fee rate used by the
Company in its securitization transactions subsequent to July 1, 1994 has been
50 basis points compared to previous securitizations which include a servicing
fee rate of 75 basis points.
The following table presents information regarding home equity loan sale
transactions for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
---------------------
1995 1994
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Home equity loans sold......................................... $274,653 $198,332
Average coupon on home equity loans sold....................... 12.65% 11.67%
Interest spread retained on home equity loans sold............. 4.42% 5.61%
Home equity loan sale gains.................................... $ 26,734 $ 22,554
</TABLE>
20
<PAGE> 22
In comparison to the first quarter of 1994, market interest rates were
higher in the first quarter of 1995, and, as a result, the Company experienced a
decrease in the weighted average interest spread retained on home equity loans
sold from 5.61% in 1994 to 4.42% in 1995. Fluctuations in and the level of
market interest rates will impact the interest spread retained by the Company on
loans sold, and, potentially, the amount of its loan sale gains. An increase in
the level of market interest rates will generally adversely affect the interest
spread on loans sold, whereas such interest spread generally widens during a
declining interest rate environment. Although actions have been taken by the
Company during a rising interest rate environment to mitigate the impact on
earnings of fluctuations in market rates, such as increasing the coupon rate
charged on its loan products, the effect of such actions will generally lag the
impact of market rate fluctuations. The weighted average interest spread
retained by the Company on loan sales during the first quarter of 1995 increased
to 4.42% from 4.10% during the fourth quarter of 1994. This increase is
primarily attributable to an increase in the weighted average coupon on loans
sold which offset an increase in the pass-through rates attributable to such
loans.
Historically, the Company has not entered into commercial interest rate
hedge transactions in connection with future loan securitizations; however,
during the first quarter of 1995 the Company entered into a hedge with respect
to a portion of the home equity mortgage loan securitization transaction which
closed during the quarter. In addition, the Company has used a prefunding
feature in connection with recent loan securitization transactions. The
prefunding feature "locks in" the pass-through rate that the Company will pay to
the investors on a prefunded amount which will be used to acquire loans at a
future date. The Company is obligated for the difference between the earnings on
such prefunded amount and the pass-through interest paid to the investors during
the period from the date of the closing of the securitization transaction until
the date of delivery of the loans. In connection with the home equity loan
securitization transaction which closed in the first quarter of 1995,
approximately $79 million was held in a prefunding account for purchase of the
Company's home equity loans during the second quarter of 1995. Pursuant thereto,
home equity loans with a remaining principal balance of approximately $79
million were delivered in May 1995.
Investment income totaled $25.0 million on average investments of
approximately $1.2 billion for the first three months of 1995 compared to
investment income of $18.2 million on average investments of approximately $977
million during the same period of 1994. At March 31, 1995 the amortized cost of
the fixed income portfolio totaled $1.1 billion and was comprised principally of
$789 million in investment grade mortgage-backed securities and $337 million in
investment grade bonds. At March 31, 1995, the weighted average rating of the
publicly traded bond portfolio according to nationally recognized rating
agencies was "AA". During 1994, the Company established a trading account for a
portion of its investment portfolio invested in common stocks. At March 31,
1995, the carrying value of investments in the Company's trading account was
$0.8 million reflecting an $88,000 net unrealized gain which is included in
investment income for the first quarter of 1995.
Loan servicing income declined $0.2 million for the three months ending
March 31, 1995 compared to the same period of 1994. Loan servicing income was
negatively affected by a $1 million increase in the amortization of prior loan
sale gains as the result of an adjustment in the estimated prepayment
assumptions of certain mortgage loans serviced by the Company, primarily
adjustable rate mortgage loans. This adjustment was made in connection with the
Company's evaluation of capitalized excess servicing income which is performed
as of each balance sheet date. This evaluation includes an analysis of the
prepayment assumptions used in calculating loan sale gains in relation to the
current rate of prepayment, and if necessary, revising the estimate using the
original discount rate. Any losses arising from adverse prepayment experience
are recognized immediately while favorable experience is recognized
prospectively. This adjustment offset the impact of a $700 million increase in
the average amount of home equity loans serviced by the Company for third
parties during the first quarter of 1995 compared to the same period of 1994. In
addition, the reduction in the normal servicing fee from 75 to 50 basis points
as discussed above has the impact of increasing current
21
<PAGE> 23
revenues (loan sale gains) while reducing future revenues (loan servicing
income). The following table reflects the components of loan servicing income
for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
--------------------
1995 1994
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Servicing fees earned........................................... $ 16,951 $11,870
Amortization of capitalized excess servicing income............. (13,467) (8,181)
-------- -------
Total................................................. $ 3,484 $ 3,689
======== =======
</TABLE>
Net insurance premiums declined $1.0 million for the first three months of
1995 compared with the same period of 1994. Net insurance premiums reflect the
recognition of credit life premiums on policies sold in prior years. The
decrease in premium income is primarily the result of UC Life's decision in 1993
to discontinue sales of credit insurance products.
Expenses. The following table presents the components of the Company's
expenses for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
-------------------
1995 1994
------- -------
(IN THOUSANDS)
<S> <C> <C>
Interest on annuity policies..................................... $19,526 $17,793
Personnel........................................................ 17,071 13,507
Interest......................................................... 5,894 2,425
Loan loss provision.............................................. 4,064 3,996
Insurance commissions............................................ 3,548 3,423
Insurance benefits............................................... 2,429 3,008
Other operating.................................................. 16,038 9,833
------- -------
Total.................................................. $68,570 $53,985
======= =======
</TABLE>
Interest on annuity policies increased $1.7 million for the first three
months of 1995 when compared to the same period of 1994 primarily as the result
of an increase in annuity reserves. Average annuity reserves were $1.4 billion
during the first quarter of 1995, an increase of approximately $127 million from
the same period of 1994.
Personnel expenses increased approximately $3.6 million primarily because
of costs associated with the expansion of the Company's mortgage operations and
an increase in incentive bonuses based on loan production.
Interest expense for the first three months of 1995 increased $3.5 million
from the same period of 1994 primarily as the result of an increase in the
weighted average interest rate on debt outstanding.
The provision for estimated losses on the commercial mortgage portfolio
during the first quarter of 1995 declined approximately $0.8 million when
compared to the same period of 1994 due to a reduction in the amount of loans
serviced and an improved commercial real estate environment. The positive effect
of this reduction on net income was offset by an increase in the provision for
estimated losses on home equity loans when compared to the first quarter of
1994.
Insurance commissions for the first three months of 1995 were $3.5 million
compared to $3.4 million for the same period of 1994. Commissions paid on
issuance of the Company's single premium deferred annuity products are generally
capitalized as deferred policy acquisition costs and amortized over the
estimated life of the policy. During the three months ended March 31, 1995, the
Company capitalized approximately $3.9 million in commissions paid on sales of
annuities compared to $3.5 million during the same period of
22
<PAGE> 24
1994. Amortization of commission expense on annuities capitalized in prior
periods was $2.6 million during the three months ended March 31, 1995, compared
to $2.2 million during the same period of 1994.
Other operating expenses for the three months ended March 31, 1995
increased approximately $6.2 million when compared to the same period of 1994
primarily as the result of expansion of the Company's mortgage operations,
including a $2.0 million increase in advertising expenses, a $0.8 million
increase in loan purchase premiums and a $0.6 million increase in occupancy
expenses.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net income for 1994 was $49.5 million ($3.48 per share based on 14,245,325
weighted average shares outstanding) compared to net income of $11.6 million for
1993 ($.97 per share based on 11,852,764 weighted average shares outstanding).
The increase in net income in 1994 resulted primarily from an increase in the
gain on sale of loans and an improved interest margin earned on annuities. In
addition, as previously discussed in "-- Discontinued Operations," net income
for 1994 and 1993 was reduced by a $5.0 million and $16.7 million loss,
respectively, recognized in connection with the Company's decisions to divest UG
Title and FMC.
The following table sets forth certain financial data for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Total revenues................................................. $314,694 $260,013
Total expenses................................................. 230,620 216,952
Income from continuing operations before income taxes.......... 84,074 43,061
Income from continuing operations.............................. 54,582 28,317
</TABLE>
Revenues. The following table sets forth information regarding the
components of the Company's revenues for the year ended December 31, 1994 and
1993.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest, charges and fees on loans............................ $116,747 $ 96,284
Loan sale gains................................................ 86,735 59,441
Investment income.............................................. 84,666 75,527
Loan servicing income.......................................... 15,173 10,077
Net insurance premiums......................................... 11,373 18,684
-------- --------
Total................................................ $314,694 $260,013
======== ========
</TABLE>
Interest, charges and fees on loans increased $20.5 million for 1994. This
line item includes interest on mortgage loans owned by the mortgage and
insurance divisions and loan origination fees earned by the mortgage division.
Loan origination fees in excess of direct origination costs on each loan held by
the Company are recognized over the life of the loan or earlier at the time of
sale on a loan sold to third parties. During 1994 and 1993, the Company sold
approximately $978 million and $463 million, respectively, in home equity loans
and recognized approximately $32.5 million and $18.9 million, respectively, in
net loan origination fees in connection with these sales. Other loan income
includes primarily prepayment fees, late charges and insurance commissions.
23
<PAGE> 25
The following table presents the composition of interest, charges and fees
on loans for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
--------------------
1994 1993
-------- -------
(IN THOUSANDS)
<S> <C> <C>
Loan origination fees........................................... $ 56,576 $35,987
Mortgage loan interest.......................................... 47,996 51,763
Other loan income............................................... 12,175 8,534
-------- -------
Total................................................. $116,747 $96,284
======== =======
</TABLE>
The Company estimates that nonaccrual loans reduced mortgage loan interest
for 1994 and 1993 by approximately $10.3 million and $9.5 million, respectively.
During 1994 the average amount of nonaccrual loans owned by the Company was
$25.5 million compared to approximately $31.7 million during 1993. In addition,
the average balance of loans serviced for third parties which were on a
nonaccrual basis or in foreclosure was $55.6 million and $43.4 million during
1994 and 1993, respectively, representing 4.1% and 4.5%, respectively, of the
average amount of loans serviced for third parties. The Company is generally
obligated to advance interest on delinquent loans to the investor or holder of
the mortgage-backed security, as the case may be, at the pass-through rate until
satisfaction of the note, liquidation of the collateral or charge off of the
delinquent loan. At December 31, 1994, the Company owned approximately $7.8
million of commercial loans which were on an accrual status, but which the
Company considers as potential problem loans, compared to $8.1 million at
December 31, 1993. The Company evaluates each of these commercial loans to
estimate its risk of loss in the investment and provides for such loss through a
charge to earnings.
Loan sale gains recognized by the Company's mortgage division increased
$27.1 million during 1994 over 1993. Loan sale gains approximate the present
value over the estimated lives of the loans of the excess of the contractual
rates on the loans sold, over the sum of the pass-through rate paid to the
buyer, a normal servicing fee, a trustee fee, a surety bond fee, if any, in
mortgage-backed securitization transactions, and an estimate of future credit
losses. The increase in the amount of loan sale gains was due primarily to a
$515 million increase in the amount of loans sold which offset a decrease in
excess servicing income retained by the Company (i.e., the stated interest rate
on the loan less the pass-through rate and the normal servicing fee and other
applicable recurring fees). Interest spread retained by the Company on loans
sold includes the normal servicing fee. During 1994, guidelines were published
by Standard & Poor's defining a normal servicing fee as 50 basis points for
servicing "B" and "C" quality home equity loans, such as those originated by the
Company. As the result of this industry data, the servicing fee rate used by the
Company in its 1994 third and fourth quarter loan securitization transactions
was 50 basis points. This resulted in an increase in the amount of loan sale
gain recognized on the home equity loans sold in the 1994 third and fourth
quarters compared to previous securitization transactions which include a
servicing fee rate of 75 basis points.
The following table presents information regarding home equity loan sale
transactions for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1993
-------- --------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Home equity loans sold......................................... $977,653 $462,873
Average coupon on home equity loans sold....................... 11.80% 12.00%
Weighted interest spread retained on home equity loans sold.... 4.49% 6.06%
Home equity loan sale gains.................................... $ 86,735 $ 59,220
</TABLE>
In comparison to 1993, market interest rates were higher in 1994, and, as a
result, the Company experienced a decrease in the weighted average interest
spread retained on home equity loans sold from 6.06% in 1993 to 4.49% in 1994.
Fluctuations in and the level of market interest rates will impact the interest
spread retained by the Company on loans sold, and, potentially, the amount of
its loan sale gains. An increase in the
24
<PAGE> 26
level of market interest rates will generally adversely affect the interest
spread on loans sold, whereas such interest spread generally widens during a
declining interest rate environment. Although actions have been taken by the
Company during a rising interest rate environment to mitigate the impact on
earnings of fluctuations in market rates, such as increasing the coupon rate
charged on its loan products, the effect of such action will generally lag the
impact of market rate fluctuations. The weighted average interest spread
retained by the Company on loan sales during the fourth quarter of 1994 declined
to 4.10% from 4.63% retained on loan sales during the first nine months of 1994.
This decrease is primarily attributable to increases in the pass-through rates
on mortgage backed securities sold under the Company sponsored shelf
registration statement due to increases in market rates. Historically, the
Company has not entered into commercial interest rate hedge transactions in
connection with warehousing loans for future loan securitizations. The Company
has used a prefunding feature in connection with recent loan securitization
transactions. Such prefunding feature "locks in" the pass-through rate that the
Company will pay to the investor on a predetermined amount of loans for future
delivery. The Company is obligated for the difference between the earnings on
such prefunded amount and the pass-through interest paid to the investor during
the period from the date of the closing of the securitization transaction until
the date of delivery of the loans. In connection with the home equity loan
securitization transaction which closed in the fourth quarter of 1994,
approximately $53 million was held in a prefunding account for purchase of the
Company's home equity loans during the first quarter of 1995.
Investment income totaled $84.7 million on average investments of
approximately $1.1 billion for 1994 compared to investment income of $75.5
million on average investments of approximately $872 million during the same
period of 1993. The impact on revenue of the increased asset base in 1994 was
partially offset by lower weighted average investment yields than those obtained
during 1993. Investment income for 1994 and 1993 includes investment gains of
$0.2 million and $0.6 million, respectively. At December 31, 1994, the amortized
cost of the fixed income portfolio totaled $1.1 billion and was comprised
principally of $790 million in investment grade mortgage-backed securities and
$281 million in investment grade bonds. At December 31, 1994, the weighted
average rating of the publicly traded bond portfolio according to nationally
recognized statistical rating agencies was "AA". During 1994, the Company
established a trading account for a portion of its investment portfolio invested
in common stocks. At December 31, 1994, the carrying value of investments in the
Company's trading account was $679,000 reflecting a $22,751 unrealized gain
which is included in investment income for 1994.
Loan servicing income increased $5.1 million for 1994 compared to 1993,
reflecting the impact of an increased amount of home equity loans serviced for
third parties offset by an increase in the amortization of capitalized excess
servicing income. The reduced normal servicing fee rate from 75 to 50 basis
points as discussed above has the impact of increasing current revenues (loan
sale gains) while reducing future revenues (loan servicing income) with respect
to the loan sale transactions occurring on and after the reduction. The
following table reflects the components of loan servicing income for the periods
indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Servicing fees earned.......................................... $ 55,428 $ 31,621
Amortization of capitalized excess servicing income............ (40,255) (21,544)
-------- --------
Total................................................ $ 15,173 $ 10,077
======== ========
</TABLE>
Net insurance premiums declined $7.3 million for 1994 compared with 1993.
Net insurance premiums reflect revenues associated primarily with credit
insurance underwritten by UC Life. The decrease in premium income is primarily
the result of the impact of UC Life's decision to discontinue sales of credit
insurance products.
25
<PAGE> 27
Expenses. The following table presents the components of the Company's
expenses for the periods indicated.
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Interest on annuity policies................................... $ 73,065 $ 76,086
Personnel...................................................... 57,380 40,784
Interest....................................................... 14,563 10,158
Insurance commissions.......................................... 14,264 13,920
Loan loss provision............................................ 13,457 17,343
Insurance benefits............................................. 12,654 18,200
Other operating................................................ 45,237 40,461
-------- --------
Total................................................ $230,620 $216,952
======== ========
</TABLE>
Interest on annuity policies declined $3.0 million in 1994 when compared to
1993 as the result of a reduction in the average interest crediting rate on the
Company's annuity policies offset by the impact of an increase in annuity
reserves. Average annuity reserves were $1.4 billion during 1994, an increase of
approximately $117 million from 1993.
Personnel expenses increased approximately $16.6 million primarily because
of costs associated with the expansion of the Company's mortgage operations,
loan production related incentives and an increase in the cost of the Company's
employee benefit and incentive plans.
Insurance commissions for 1994 increased by approximately $.3 million over
commissions for 1993. Commissions paid on issuance of the Company's deferred
annuity products are generally capitalized as deferred policy acquisition costs
and amortized over the estimated life of the policy. During 1994, the Company
capitalized approximately $20.7 million in commissions paid on sales of
annuities compared to $13.7 million during 1993. Amortization of commission
expense on annuities capitalized in prior periods was $9.5 million during 1994,
compared to $5.6 million during 1993.
Insurance benefits for 1994 declined $5.5 million compared to 1993
primarily as the result of a reduction in benefits associated with ordinary life
and credit insurance products.
The Company's loan loss provision was $13.5 million and $17.3 million for
1994 and 1993, respectively. The decrease in the provision resulted from a
decrease in the provision for losses on home equity loans due to a reduction in
the amount of loans owned by the Company, a decrease in the amount of property
placed into foreclosure and a lower incidence of loss per property sold.
Interest expense for 1994 increased approximately $4.4 million compared to
1993 primarily as the result of an increase in the weighted average interest
rate charged on debt.
Other operating expenses for 1994 increased approximately $4.8 million when
compared to 1993 primarily as the result of costs associated with the expansion
of the Company's mortgage operations, including a $2.3 million increase in
advertising expenses and a $1.3 million increase in occupancy and equipment
expenses. Other operating expenses in 1993 included a $2.3 million accrual for
the estimated cost of a legal settlement and $1.4 million in estimated losses in
connection with termination of a third party administrative contract for credit
insurance.
ASSET QUALITY AND RESERVES
The quality of the Company's loan and bond portfolios and of the loan
portfolio serviced for third parties significantly affects the profitability of
the Company. The values of and markets for these assets are dependent on a
number of factors, including general economic conditions, interest rates and
governmental regulations. Adverse changes in such factors, which become more
pronounced in periods of economic decline, may affect the quality of these
assets and the Company's resulting ability to sell these assets for acceptable
prices.
26
<PAGE> 28
General economic deterioration can result in increased delinquencies on existing
loans, reductions in collateral values and declines in the value of investments
resulting from a reduced capacity of issuers to repay the bonds.
Loans. Substantially all of the loans owned by the Company were originated
through the Company's branch (i.e., retail) network or wholesale loan programs.
In connection with its origination of home equity loans, the Company relies on
thorough underwriting and credit review procedures, a mortgage on the borrower's
residence and, in some cases, other security, and, in its retail origination
program, contact with borrowers through its branch office system to manage
credit risk on its loans. In addition to servicing the loans owned by the
Company, the mortgage division serviced approximately $1.9 billion in loans for
third parties at March 31, 1995, $1.7 billion of which are home equity loans.
Substantially all of the home equity loans serviced for third parties were
publicly sold as mortgage backed securities ("pass-through certificates"). The
purchasers of the pass-through certificates receive a credit enhanced security
which is generally achieved in part by subordinating the excess interest spread
retained by the Company to the payment of scheduled principal and interest on
the certificates. Such subordination relates to credit losses which may occur
after the sale of the loans and continues until the earlier of the payment in
full of the loans or termination of the agreement pursuant to which the loans
were sold. If cumulative payment defaults exceed the amount subordinated, a
third party insurer is obligated to pay any further losses experienced by the
owners of the pass-through certificates.
The Company is also obligated to cure, repurchase or replace loans which
may be determined after the sale to violate representations and warranties
relating to them and which are made by the Company at the time of the sale. The
Company regularly evaluates the quality of the loan portfolio and estimates its
risk of loss based upon historical loss experience, prevailing economic
conditions, estimated collateral value and such other factors which, in
management's judgment, are relevant in estimating the credit risk in owned
and/or serviced loans. Estimated losses on the owned portfolio are provided for
by an increase in the allowance for loan losses through a charge to current
operating income. At March 31, 1995, the Company's allowance for loan losses was
$16.8 million. For loans sold, the Company reduces the amount of gain recognized
on the sale by the estimated amount of credit losses, and records such amount on
its balance sheet in the allowance for loss on loans serviced. At March 31,
1995, the allowance for loss on loans serviced was $29.6 million. The maximum
recourse associated with sales of home equity loans according to terms of the
loan sale agreements totaled approximately $323 million, of which amount
approximately $312 million relates to the subordinated cash and excess interest
spread. Should credit losses on loans sold materially exceed the Company's
estimates for such losses, such consequence will have a material adverse effect
on the Company's operations.
At March 31, 1995, the contractual balance of loans serviced was
approximately $2.2 billion comprised of approximately $387 million serviced for
the Company and approximately $1.9 billion serviced for investors. The portfolio
is geographically diversified. Although the Company services loans in 46 states,
at March 31, 1995 a substantial portion of the loans serviced were originated in
Florida (13.4%), Ohio (11.5%) and Louisiana (10.1%), respectively, and no other
state accounted for more than 8.0% of the serviced portfolio. Included in the
serviced portfolio are commercial loans originated by the Company, a substantial
portion of which were originated in Florida (27.4%) and Georgia (16.8%) and no
other state accounted for more than 8.5% of the commercial loans serviced. The
risk inherent in such concentrations is dependent not only upon regional and
general economic stability which affects property values, but also the financial
well-being and creditworthiness of the borrower.
27
<PAGE> 29
The following table provides a summary of loans owned and/or serviced which
are past due 30 days or more, foreclosed properties and loans charged off as of
the dates indicated.
<TABLE>
<CAPTION>
FORECLOSED PROPERTIES
---------------------
SERVICED
FOR NET
CONTRACTUAL DELINQUENCIES % OF OWNED THIRD LOANS % OF
BALANCE CONTRACTUAL CONTRACTUAL BY THE PARTY CHARGED AVERAGE
PERIOD ENDED OF LOANS BALANCE BALANCE COMPANY INVESTORS OFF LOANS*
- ------------------------ --------- -------- ------- ------- --------- ------- ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C>
MARCH 31, 1995
Home equity........... $1,895,955 $134,514 7.09% $ 7,527 $13,187 $ 3,470 0.76%
Commercial............ 267,291 5,208 1.95% 21,509 10,738 210 0.32%
Conventional.......... 70,986 2,634 3.71% 285 -- 36 0.20%
---------- -------- ------- ------- -------
Total......... $2,234,232 $142,356 6.37% $29,321 $23,925 $ 3,716
========== ======== ======= ======= =======
DECEMBER 31, 1994
Home equity........... $1,683,698 $129,203 7.67% $ 8,791 $11,837 $11,694 0.84%
Commercial............ 274,413 5,377 1.96% 22,131 8,784 5,658 1.83%
Conventional.......... 74,294 2,672 3.60% 35 -- 100 0.16%
---------- -------- ------- ------- -------
Total......... $2,032,405 $137,252 6.75% $30,957 $20,621 $17,452
========== ======== ======= ======= =======
DECEMBER 31, 1993
Home equity........... $1,125,139 $ 92,974 8.26% $17,014 $ 8,355 $ 8,548 0.88%
Commercial............ 345,365 19,292 5.59% 20,871 9,275 3,579 0.95%
Conventional.......... 98,277 3,747 3.81% 148 -- 77 0.09%
---------- -------- ------- ------- -------
Total......... $1,568,781 $116,013 7.40% $38,033 $17,630 $12,204
========== ======== ======= ======= =======
</TABLE>
- ---------------
* Annualized for the three months ended March 31, 1995.
Management continues to focus on reducing the level of non-earning assets
owned and/or serviced by expediting the foreclosure process. The balance of
foreclosed home equity loans owned and/or serviced totaled $20.7 million at
March 31, 1995 compared to $22.0 million at March 31, 1994.
The above delinquency and loan loss experience represents the Company's
recent experience. However, the delinquency, foreclosure and net loss
percentages may be affected by the increase in the size and relative lack of
seasoning of the portfolio. In addition, the Company can neither quantify the
impact of property value declines, if any, on the home equity loans nor predict
whether or to what extent or how long such declines may exist. In a period of
such declines, the rates of delinquencies, foreclosures and losses on the home
equity loans could be higher than those theretofore experienced in the mortgage
lending industry in general. Adverse economic conditions (which may or may not
affect real property values) may affect the timely payment by borrowers of
scheduled payments of principal and interest on the home equity loans and,
accordingly, the actual rates of delinquencies, foreclosures and losses. As a
result, the information in the above tables should not be considered as the only
basis for assessing the likelihood, amount or severity of delinquencies or
losses in the future on home equity loans and no assurance can be given that the
delinquency and loss experience presented in the tables will be indicative of
such experience on home equity loans.
28
<PAGE> 30
A summary analysis of the changes in the Company's allowance for loan
losses for the indicated periods is as follows.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
------------------- -------------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at beginning of period.......... $16,508 $21,017 $21,017 $15,842 $15,962
Loans charged to allowance
Home equity........................... (3,827) (4,029) (12,745) (9,114) (5,511)
Commercial............................ (210) -- (5,767) (3,579) (4,805)
Conventional.......................... (36) (15) (149) (142) (158)
------- ------- ------- ------- -------
Total......................... (4,073) (4,044) (18,661) (12,835) (10,474)
Recoveries on loans previously charged
to allowance.......................... 357 276 1,209 631 1,085
------- ------- ------- ------- -------
Net loans charged off................... (3,716) (3,768) (17,452) (12,204) (9,389)
------- ------- ------- ------- -------
Loan loss provisions.................... 4,064 3,996 13,457 17,343 10,027
Reserve reclassification................ (14) (61) (514) 36 (758)
------- ------- ------- ------- -------
Balance at end of period................ $16,842 $21,184 $16,508 $21,017 $15,842
======= ======= ======= ======= =======
Specific reserves....................... $ 6,353 $ 8,429 $ 6,571 $ 8,500 $ 7,067
Unallocated reserves.................... 10,489 12,755 9,937 12,517 8,775
------- ------- ------- ------- -------
Total reserves................ $16,842 $21,184 $16,508 $21,017 $15,842
======= ======= ======= ======= =======
</TABLE>
Specific reserves are provided for foreclosures in which the carrying value
of the loan exceeds the market value of the collateral. Unallocated reserves are
provided for loans not in foreclosure and are calculated primarily using
objective measurement techniques. Unallocated reserves also include reserves for
active loans which have been modified or indicate potential problems as well as
reserves for a $32.5 million subordinated position the Company acquired in
connection with the securitization and sale of approximately $230 million in
commercial real estate mortgage loans in 1990. At March 31, 1995, the Company
owned $29.3 million of property acquired in settlement of loans, excluding the
specific reserves attributed to these properties. These balances are included in
the loans owned by the Company. The specific reserve in the table above is
provided to reduce the carrying value of these properties to their market value.
A summary of the allowances for future credit losses on loans and
foreclosed properties owned by the Company and loans sold with recourse
(including for purposes hereof loans sold with limited guarantees and
subordination of cash and excess interest spread owned by the Company) as of the
dates indicated is as follows:
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
------------------ -----------------------------
1995 1994 1994 1993 1992
------- ------- ------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Allowance for loan losses
(Applicable to loans and foreclosed
properties owned by the Company)........ $16,842 $21,184 $16,508 $21,017 $15,842
Allowance for loss on loans serviced
(Applicable to loans sold with recourse)... 29,580 16,393 26,822 12,938 7,015
------- ------- ------- ------- -------
Total.............................. $46,422 $37,577 $43,330 $33,955 $22,857
======= ======= ======= ======= =======
</TABLE>
As of March 31, 1995, approximately $1.7 billion of home equity loans sold
were serviced by UC Lending under agreements substantially all of which provide
for the subordination of cash and excess interest spread owned by the Company
for credit losses ("loans sold with recourse"). The maximum recourse associated
with sales of home equity loans according to terms of the loan sales agreements
was approximately $323 million at
29
<PAGE> 31
March 31, 1995, of which $312 million relates to the subordinated cash and
excess interest spread. The Company's estimate of its losses, based on
historical loan loss experience, was approximately $29.6 million at March 31,
1995 and is recorded in the Company's allowance for loss on loans serviced.
Should credit losses on loans sold with limited recourse, or subordination of
cash and excess interest spread owned by the Company, materially exceed the
Company's estimate for such losses, such consequence will have a material
adverse impact on the Company's operations.
Recent legal developments related to mortgage loans. On March 21, 1994, the
United States Court of Appeals for the Eleventh Circuit held, in part, that a
lender improperly disclosed the collection of the Florida state intangible tax
from the borrower, thereby subjecting the loan to rescission under the TILA by
the borrower for three years after it was made. Subsequent to the court's
initial decision and prior to its refusal to reconsider its decision, the
Florida legislature amended the language of the intangible tax to clarify the
legislature's previous intention that the intangible tax be disclosed for
purposes of the TILA in the manner that had been followed by most lenders in
Florida, including the Company. Although the Florida legislature intended this
legislation to apply retroactively, no final court decision has been rendered as
to the effect of this legislation on loans originated prior to its effective
date. This court decision may also apply to a similar intangible tax imposed by
other states. To its knowledge, as of June 15, 1995, no claims have been filed
against the Company under this court decision (other than as a defense in
foreclosure proceedings) and no notice of a breach of a representation has been
received under the Company's loan sale agreements requesting it to repurchase,
cure or substitute other loans for the loans sold. If the intent of the Florida
legislature is not upheld and if a substantial number of claims are filed by
borrowers against the Company resulting in rescission or repurchase, the
Company's financial statements and operations will be materially adversely
affected. As the financial impact, if any, of this contingency cannot presently
be reasonably estimated, the Company has made no accrual therefor.
Amendments to the TILA which may become effective on October 1, 1995,
impose additional disclosure requirements and prohibit certain prepayment
penalty charges, among other requirements, on loans with a specified level of
origination fees or a specified interest rate level. A significant percentage of
the Company's loans originated after the effective date could be subject to the
requirements of this legislation. The Company is currently reviewing this
legislation in its final form to determine the impact of its provisions on the
Company's business or results of operations.
Investment securities. The Company's investment portfolio consists
primarily of mortgage backed securities and corporate bonds, comprising 66% and
29% of the portfolio at March 31, 1995, respectively. At March 31, 1995,
approximately 93% of the Company's portfolio of investment securities were
classified in an available-for-sale category and the carrying value adjusted to
fair value by means of an adjustment to stockholders' equity. The remainder of
the portfolio consists primarily of private placements made either directly or
through an investment partnership and are classified as held-to-maturity and
valued at cost. At March 31, 1995, the Company owned $0.8 million in equity
securities classified as trading securities. The net unrealized loss in the debt
securities portfolio (amortized cost over fair value) at March 31, 1995 was
$32.7 million compared to an unrealized loss of $73.9 million at December 31,
1994. At March 31, 1995, the weighted average rating of UC Life's publicly
traded bond portfolio was "AA", the amortized cost of assets allocated to
investments in investment grade fixed maturity securities was $337 million or
29.4% of the portfolio and in investment grade mortgage-backed securities was
$789 million or 68.8% of the portfolio. At March 31, 1995 the amortized cost of
UC Life's holdings of non-investment grade publicly traded bonds was $21.1
million or 1.8% of the portfolio.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal cash requirements consist of funding loan
originations in its mortgage operations and the payment of policyholder claims
and surrenders incurred in its insurance operations. The Company's mortgage
operations require continued access to short and long-term sources of debt
financing, the sale of loans to UC Life and the sale of loans and asset-backed
securities in the secondary market. The liquidity requirements for the Company's
insurance operations are generally met by funds provided from the sale of
annuities and cash flow from its investments in fixed income securities and
mortgage loans.
30
<PAGE> 32
The Company's primary debt facility has been a revolving credit facility
(the "Bank Facility") dated as of October 11, 1988. On November 2, 1994 the
Company publicly sold $125 million of its senior unsecured notes (the "Senior
Notes"). The net proceeds from the sale of the Senior Notes were used to repay a
portion of the principal amount of the indebtedness outstanding under the Bank
Facility. The Senior Notes bear interest at the rate of 9.35% per annum, provide
for interest payable semi-annually, mature on November 1, 1999 and are not
redeemable prior to maturity. The Senior Notes rank on a parity with other
unsecured and unsubordinated indebtedness of the Company. An amendment to the
Bank Facility became effective upon the consummation of the sale of the Senior
Notes which (i) extended the maturity of the Bank Facility from December 31,
1995 to December 31, 1996, (ii) released liens on the stock of the Company's
subsidiaries and other collateral, (iii) reduced the amount available under the
Bank Facility from $200 million to $113.6 million and (iv) permitted the
non-insurance subsidiaries of the Company to have one or more warehouse lines of
credit with an aggregate amount outstanding of up to $300 million.
The following discussion reflects the primary sources of liquidity and
capital for each of the Company's primary operating divisions.
Mortgage. The principal cash requirements of the Company's mortgage
operations arise from loan originations, deposits to reserve accounts,
repayments of inter-company debt borrowed under the Bank Facility, debt service
relating to the Senior Notes, payments of operating and interest expenses and
income taxes related to loan sale transactions. Loan originations are funded
principally through the Bank Facility, short-term bank facilities and warehouse
facilities (discussed below) pending loan sales. In addition, as of June 8,
1995, UC Lending had available a secured warehouse facility provided by an
investment bank that will act as lead underwriter of the Company's second
quarter public loan securitization transaction. The warehouse facility is
directly related to this securitization transaction and initially provides
funding for up to $245 million of eligible home equity loans for such
securitization and will mature with the closing of the last delivery of loans
under the prefunding accounts relative to this securitization. As of June 15,
1995, approximately $119.9 million was outstanding under this warehouse
facility.
UC Lending and other mortgage lending subsidiaries of the Company entered
into a credit agreement dated as of May 23, 1995 with First Union National Bank
of North Carolina and certain other lenders signatory thereto (the "Warehouse
Facility"). Under the Warehouse Facility, UC Lending and the other mortgage
lending subsidiaries may borrow up to $150,000,000 on a revolving basis secured
by home equity loans eligible thereunder. Loans under the Warehouse Facility are
subject to the satisfaction of certain borrowing conditions, including a minimum
borrowing base and will bear interest at a floating rate. Borrowings under the
Warehouse Facility are required to be repaid from the proceeds of the sale or
other disposition of the home equity loan collateral. The lenders' commitment
under the Warehouse Facility is scheduled to terminate on May 23, 1997. As of
June 15, 1995, approximately $41.4 million was outstanding under the Warehouse
Facility.
Substantially all of the loans originated or acquired by UC Lending are
sold. Net cash from operating activities of the Company in 1994 and 1993 and for
the first quarter of 1995 and 1994 reflects approximately $948 million, $596
million, $321 million and $202 million, respectively, in cash used for loan
originations and acquisitions. The primary source of funding for loan
originations is derived from the reinvestment of proceeds from the ultimate sale
of loans in the secondary market which totaled approximately $978 million and
$463 million in 1994 and 1993, respectively, and $275 million and $198 million
in the three months ended March 31, 1995 and 1994, respectively. In connection
with the loan sale transactions in the secondary market, third-party surety
bonds and cash deposits by the Company as credit enhancements were provided. The
loan sale transactions required the subordination of certain cash flows payable
to UC Lending and its subsidiaries to the payment of principal and interest due
to certificate holders. In connection with these transactions, UC Lending was
required, in some instances, to fund an initial deposit, and thereafter, in each
transaction, a portion of the amounts receivable by UC Lending and its
subsidiaries from the excess interest spread is required to be placed and
maintained in a reserve account to the extent of the subordination requirements.
The subordination requirements generally provide that the excess interest spread
is payable to a reserve account until a specified level of cash, which is less
than the maximum subordination amount, is accumulated therein. The capitalized
excess servicing income of the Company is subject to being utilized first to
replenish cash paid
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from the reserve account to fund shortfalls in collections from borrowers who
default on the payment of principal or interest on the loans underlying the
pass-through certificates issued until the total of the Company's deposits into
the reserve account equal the maximum subordination amount. In connection with
the issuance and sale of approximately $1.8 billion of pass-through certificates
through March 31, 1995 under the Company sponsored shelf-registration statement,
the subordination amounts aggregate approximately $273 million. After the
Company's deposits into the reserve account equal the maximum subordination
amount for a transaction, the subordination of the related excess interest
spread (including the guarantee fee payable therefrom) for these purposes is
terminated. The excess interest spread required to be deposited and maintained
in the respective reserve accounts will not be available to support the cash
flow requirements of the Company until such amount exceeds the maximum
subordinated amount (other than amounts, if any, in excess of the specified
levels required to be maintained in the reserve accounts, which may be
distributed periodically to the Company). At March 31, 1995, the amounts on
deposit in such reserve accounts totaled $97.8 million.
The expansion of the Company's mortgage division and the increase in the
amount of loans originated are capital intensive operations; therefore, adequate
credit facilities and other sources of funding, including the ability of the
Company to sell loans in the secondary market and to UC Life, are essential for
the continuation of and the growth in the Company's loan operations. At March
31, 1995, the Company's debt facilities available to fund general operating
needs totaled $276 million, of which $236 million was outstanding, resulting in
available, but unfunded debt capacity for general operating needs of $40
million. During the first quarter of 1995, peak borrowings under such credit
facilities reached $262 million and rose to $273 million subsequent to quarter
end. At December 31, 1994, the Company had $266 million in such debt facilities
available with $212 million outstanding, resulting in $54 million in available,
but unfunded debt capacity. The Company continues to evaluate its current
resources and to explore the feasibility of additional capital market
transactions.
Life insurance. The principal cash requirement of UC Life consists of
contractual obligations to policyholders, principally through policy claims and
surrenders. The primary sources of funding these obligations, in addition to
cash flow from investments, are the sale of annuities. Net cash flow from
annuity operations is used to build an investment portfolio, which in turn
produces future cash flows from investment income and provides a secondary
source of liquidity for this division. Net cash provided by operating activities
of the insurance division in 1994 and 1993 was approximately $64 million and $78
million, respectively, and in the first quarter of 1995 and 1994 was
approximately $24.2 million and $19.5 million, respectively, resulting primarily
from cash earnings on investments. The Company monitors available cash and cash
equivalents to maintain adequate balances for current payments while maximizing
cash available for longer term investment activities. The Company's financing
activities during 1994 and 1993 reflect approximately $250 million and $208
million, respectively and in the first quarter of 1995 and 1994 reflect
approximately $48.6 million and $45.0 million, respectively, in cash received
primarily from sales by UC Life of its annuity products. As reflected in the net
cash used by investing activities during the same periods, investment purchases
were approximately $300 million, $293 million, $81.6 million and $106.5 million,
respectively, reflecting the investment of these funds and the reinvestment of
proceeds from maturities of investments. Cash used by financing activities
during these periods also reflects payments of $192 million, $136 million, $53.8
million and $39.9 million, respectively, primarily on annuity products resulting
from policyholder surrenders and claims. The increase in annuity surrenders
during 1994 and the first quarter of 1995 was expected, due in part to an
increase in the amount of annuity policies which were beyond the surrender
penalty period. The interest margin on the Company's annuity liabilities during
the first quarter of 1995 was 2.38% compared to 2.61% during the same period of
1994. UC Life's investments at March 31, 1995 included approximately $337
million in residential and commercial mortgage loans, and the amortized cost of
its bond portfolio included $358 million in corporate and government bonds and
private debt placements and $789 million in mortgage-backed securities.
The investment portfolio is also managed to provide a secondary source of
liquidity as investments can be sold, if necessary, to fund abnormal levels of
policy surrenders, claims and expenses. An unanticipated increase in surrenders
would impact the Company's liquidity, potentially requiring the sale of certain
assets, such as bonds and loans prior to their maturities, which may be at a
loss.
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As a Louisiana domiciled insurance company, UC Life is subject to certain
regulatory restrictions on the payment of dividends. UC Life had the capacity at
March 31, 1995 to pay dividends of $8.2 million. UC Life did not pay any
dividends to the Company during 1992, 1993 or 1994 in order to retain capital in
UC Life.
ACCOUNTING STANDARDS
In May 1993 and in October 1994, the FASB issued Statements of Financial
Accounting Standards Nos. 114 and 118 ("SFAS 114" and "SFAS 118") which address
the accounting by creditors for impairment of loans and specify how allowances
for credit losses related to certain loans should be determined. The statements
also address the accounting by creditors for all loans that are restructured in
a troubled debt restructuring involving modification of the terms of a
receivable. The implementation of the provisions of SFAS 114 and SFAS 118 in the
first quarter of 1995 did not have a material effect on the financial statements
of the Company.
DESCRIPTION OF SECURITIES
GENERAL
The following description of the terms of the Securities sets forth certain
general terms and provisions of the Securities to which any Prospectus
Supplement may relate. The particular terms of the Securities offered by any
Prospectus Supplement and the extent, if any, to which such general provisions
may apply to the Securities so offered will be described in the Prospectus
Supplement relating to such Securities.
DEBT SECURITIES
The Senior Debt Securities are to be issued under an indenture dated as of
October 1, 1994, as supplemented from time to time (the "Senior Indenture"),
between the Company and The First National Bank of Chicago, as Trustee (the
"Senior Trustee"), and the Subordinated Debt Securities are to be issued under
an indenture dated as of October 1, 1994, as supplemented from time to time (the
"Subordinated Indenture"), between the Company and State Street Bank and Trust
Company, as Trustee (the "Subordinated Trustee"). The term "Trustee" as used
herein shall refer to either the Senior Trustee or the Subordinated Trustee, as
appropriate, for Senior Debt Securities or Subordinated Debt Securities. The
Senior Indenture and the Subordinated Indenture (being referred to herein
collectively as the "Indentures" and individually as an "Indenture") are filed
as exhibits to the Registration Statement. The Indentures are subject to and
governed by the Trust Indenture Act of 1939, as amended (the "TIA"). The
statements made under this heading relating to the Debt Securities and the
Indentures are summaries of the provisions thereof, do not purport to be
complete and are qualified in their entirety by reference to the Indentures,
including the definitions of certain terms therein and in the TIA. Certain
capitalized terms used below but not defined herein have the meanings ascribed
to them in the applicable Indenture. Unless otherwise noted below, section
references below are to both Indentures.
The particular terms of the Debt Securities being offered (the "Offered
Debt Securities"), any modifications of or additions to the general terms of the
Debt Securities as described herein that may be applicable in the case of the
Offered Debt Securities and any applicable Federal income tax considerations
will be described in the Prospectus Supplement relating to the Offered Debt
Securities. Accordingly, for a description of the terms of the Offered Debt
Securities, reference must be made both to the Prospectus Supplement relating
thereto and the description of Debt Securities set forth in this Prospectus.
General
The Debt Securities will be direct, unsecured obligations of the Company.
The indebtedness represented by the Senior Debt Securities will rank equally
with all other unsecured and unsubordinated indebtedness of the Company. The
indebtedness represented by the Subordinated Debt Securities will be
subordinated in right of payment to the prior payment in full of the Senior
Indebtedness of the Company (including the Senior
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Debt Securities) as described under "-- Subordination" below. The Debt
Securities may be issued in one or more series.
The Company primarily conducts its operations through its Subsidiaries. The
rights of the Company and its creditors, including the Holders of the Debt
Securities, to participate in the assets of any Subsidiary upon the latter's
liquidation or reorganization will be subject to the prior claims of the
Subsidiary's creditors except to the extent that the Company may itself be a
creditor with recognized claims against the Subsidiary.
The accompanying Prospectus Supplement will set forth the terms of the
Offered Debt Securities, which may include the following:
(1) The title of the Offered Debt Securities and whether they are
Senior Debt Securities or Subordinated Debt Securities.
(2) The aggregate principal amount of the Offered Debt Securities and
any limit on the aggregate principal amount of the Offered Debt Securities.
(3) The percentage of the principal amount at which the Offered Debt
Securities will be issued and, if other than the principal amount thereof,
the portion of the principal amount thereof payable upon declaration of
acceleration of the Maturity thereof or the method by which such portion
shall be determined.
(4) The date or dates on which or periods during which the Offered
Debt Securities may be issued, and the date or dates, or the method by
which such date or dates will be determined, on which the principal of (and
premium, if any, on) the Offered Debt Securities will be payable.
(5) The rate or rates at which the Offered Debt Securities will bear
interest, if any, or the method by which such rate or rates shall be
determined, the date or dates from which such interest, if any, shall
accrue or the method by which such date or dates shall be determined, the
interest payment dates on which such interest will be payable and, if the
Offered Debt Securities are Registered Securities, the regular record
dates, if any, for the interest payable on such interest payment dates,
and, if the Offered Debt Securities are floating rate securities, the
notice, if any, to Holders regarding the determination of interest and the
manner of giving such notice.
(6) The place or places where the principal of (and premium, if any)
and interest on the Offered Debt Securities shall be payable; the extent to
which, or the manner in which, any interest payable on any Global Note (as
defined below) on an interest payment date will be paid, and the manner in
which any principal of, or premium, if any, on, any Global Note will be
paid.
(7) The obligation, if any, of the Company to redeem, repay or
purchase the Offered Debt Securities pursuant to any mandatory redemption,
sinking fund or analogous provisions or at the option of the Holder thereof
and the period or periods within which, or the dates on which, the prices
at which and the terms and conditions upon which the Offered Debt
Securities shall be redeemed, repaid or purchased, in whole or in part,
pursuant to such obligation.
(8) The right, if any, of the Company to redeem the Offered Debt
Securities at its option and the period or periods within which, or the
date or dates on which, the price or prices at which, and the terms and
conditions upon which Offered Debt Securities may be redeemed, if any, in
whole or in part, at the option of the Company or otherwise.
(9) If the coin or currency in which the Offered Debt Securities
shall be issuable is U.S. dollars, the denominations of the Offered Debt
Securities if other than denominations of $1,000 and any integral multiple
thereof.
(10) Whether the Offered Debt Securities are to be issued as original
issue discount securities ("Discount Securities") and the amount of
discount at which such Offered Debt Securities may be issued and, if other
than the principal amount thereof, the portion of the principal amount of
Offered Debt Securities which shall be payable upon declaration of
acceleration of the Maturity thereof upon an Event of Default.
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(11) Provisions, if any, for the defeasance of Offered Debt Securities
or certain of the Company's obligations with respect to the Offered Debt
Securities.
(12) Whether the Offered Debt Securities are to be issued as
Registered Securities or Bearer Securities or both, and, if Bearer
Securities are issued, whether any interest coupons appertaining thereto
("Coupons") will be attached thereto, whether such Bearer Securities may be
exchanged for Registered Securities and the circumstances under which, and
the place or places at which, any such exchanges, if permitted, may be
made.
(13) Whether provisions for payment of additional amounts or tax
redemptions shall apply and, if such provisions shall apply, such
provisions; and, if any of the Offered Debt Securities are to be issued as
Bearer Securities, the applicable procedures and certificates relating to
the exchange of temporary Global Notes for definitive Bearer Securities.
(14) If other than U.S. dollars, the currency, currencies or currency
units (the term "currency" as used herein will include currency units) in
which the Offered Debt Securities shall be denominated or in which payment
of the principal of (and premium, if any) and interest on the Offered Debt
Securities may be made, and particular provisions applicable thereto and,
if applicable, the amount of Offered Debt Securities which entitles the
Holder of an Offered Debt Security or its proxy to one vote for purposes of
voting at a meeting of Holders of the Offered Debt Securities.
(15) If the principal of (and premium, if any) or interest on the
Offered Debt Securities is to be payable, at the election of the Company or
a Holder thereof, in a currency other than that in which the Debt
Securities is denominated or payable without such election, in addition to
or in lieu of the applicable provisions of the Indentures, the period or
periods within which and the terms and conditions upon which, such election
may be made and the time and the manner of determining the exchange rate or
rates between the currency or currencies in which the Offered Debt
Securities are denominated or payable without such election and the
currency or currencies in which the Offered Debt Securities are to be paid
if such election is made.
(16) The date as of which any Offered Debt Securities shall be dated.
(17) If the amount of payments of principal of (and premium, if any)
or interest on the Offered Debt Securities may be determined with reference
to an index, including, but not limited to, an index based on a currency or
currencies other than that in which the Offered Debt Securities are
denominated or payable, or any other type of index, the manner in which
such amounts shall be determined.
(18) If the Offered Debt Securities are denominated or payable in
foreign currency, any other terms concerning the payment of principal of
(and premium, if any) or any interest on the Offered Debt Securities
(including the currency or currencies of payment thereof).
(19) The designation of the original Currency Determination Agent, if
any.
(20) The applicable Overdue Rate, if any.
(21) If the Offered Debt Securities do not bear interest, the
applicable dates upon which the Company will furnish or cause to be
furnished to the Trustee a list of the names and addresses of the
Registered Holders of the Offered Debt Securities.
(22) Any addition to, or modification or deletion of, any Events of
Default or covenants provided for in the applicable Indenture with respect
to the Offered Debt Securities.
(23) If any of the Offered Debt Securities are to be issued as Bearer
Securities, (x) whether interest in respect of any portion of a temporary
Offered Debt Security in global form (representing all of the Outstanding
Bearer Securities of the series) payable in respect of any interest payment
date prior to the exchange of such temporary Offered Debt Security for
definitive Offered Debt Securities shall be paid to any clearing
organization with respect to the portion of such temporary Offered Debt
Security held for its account and, in such event, the terms and conditions
(including any certification require-
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ments) upon which any such interest payment received by a clearing
organization will be credited to the Persons entitled to interest payable
on such interest payment date, (y) the terms upon which interests in such
temporary Offered Debt Security in global form may be exchanged for
interests in a permanent Global Note or for definitive Offered Debt
Securities and the terms upon which interests in a permanent Global Note,
if any, may be exchanged for definitive Offered Debt Securities and (z) the
cities in which the Authorized Newspapers designated for the purposes of
giving notices to Holders are published.
(24) Whether the Offered Debt Securities shall be issued in whole or
in part in the form of one or more Global Notes and, in such case, the
depositary or any common depositary for such Global Notes; and if the
Offered Debt Securities are issuable only as Registered Securities, the
manner in which and the circumstances under which Global Notes representing
Offered Debt Securities may be exchanged for Registered Securities in
definitive form.
(25) The designation, if any, of any depositaries, trustees (other
than the applicable Trustee), paying agents, authenticating agents,
security registrars (other than the applicable Trustee) or other agents
with respect to the Offered Debt Securities.
(26) If the Offered Debt Securities are to be issuable in definitive
form only upon receipt of certain certificates or other documents or upon
satisfaction of certain conditions, the form and terms of such
certificates, documents or conditions.
(27) If the Offered Debt Securities are Subordinated Debt Securities,
whether they will be convertible or exchangeable into shares of Common
Stock and, if so, the terms and conditions, which may in addition to or in
lieu of the provisions contained in the Subordinated Indenture, upon which
such Offered Debt Securities will be so convertible or exchangeable,
including the conversion or exchange price and the conversion or exchange
period.
(28) Any other terms of the Offered Debt Securities not specified in
the Indenture under which such Offered Debt Securities are to be issued
(which other terms shall not be inconsistent with the provisions of such
Indenture).
Each Indenture provides that the aggregate principal amount of Debt
Securities that may be issued thereunder is unlimited. The Debt Securities may
be issued in one or more series thereunder, in each case as authorized from time
to time by the Board of Directors of the Company, or any committee thereof or
any duly authorized officer or pursuant to any modification of an Indenture.
(Section 3.01)
In the event that Discount Securities are issued, the Federal income tax
consequences and other special considerations applicable to such Discount
Securities will be described in the Prospectus Supplement relating thereto.
The general provisions of the Indentures do not contain any provisions that
would limit the ability of the Company or its Subsidiaries to incur indebtedness
or that would afford holders of Debt Securities protection in the event of a
highly leveraged or similar transaction involving the Company or its
Subsidiaries. Reference is made to the accompanying Prospectus Supplement for
information with respect to any deletions from, modifications of or additions,
if any, to the Events of Default or covenants of the Company described below
that are applicable to the Offered Debt Securities, including any addition of
covenants or other provisions providing event risk or similar protection.
All of the Debt Securities of a series need not be issued at the same time,
and may vary as to denomination, interest rate, maturity and other provisions
and unless otherwise provided, a series may be reopened for issuance of
additional Debt Securities of such series. (Section 3.01)
Denominations, Registration and Transfer
Unless specified in the Prospectus Supplement, the Debt Securities of any
series shall be issuable only as Registered Securities in denominations of
$1,000 and any integral multiple thereof and shall be payable only in U.S.
dollars. (Section 3.02) The Indentures also provide that Debt Securities of a
series may be issuable in
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global form. See "-- Book-Entry Debt Securities." Unless otherwise indicated in
the Prospectus Supplement, Bearer Securities (other than in global form) will
have Coupons attached. (Section 2.01)
Registered Securities of any series will be exchangeable for other
Registered Securities of the same series of like aggregate principal amount and
of like Stated Maturity and with like terms and conditions. If so specified in
the Prospectus Supplement, at the option of the Holder thereof, to the extent
permitted by law, any Bearer Security of any series which by its terms is
registrable as to principal and interest may be exchanged for a Registered
Security of such series of like aggregate principal amount and of a like Stated
Maturity and with like terms and conditions, upon surrender of such Bearer
Security at the corporate trust office of the applicable Trustee or at any other
office or agency of the Company designated for the purpose of making any such
exchanges. Subject to certain exceptions, any Bearer Security issued with
Coupons surrendered for exchange must be surrendered with all unmatured Coupons
and any matured Coupons in default attached thereto. (Section 3.05)
Notwithstanding the foregoing, the exchange of Bearer Securities for
Registered Securities will be subject to the provisions of United States income
tax laws and regulations applicable to Debt Securities in effect at the time of
such exchange. (Section 3.05)
Except as otherwise specified in the Prospectus Supplement, in no event may
Registered Securities, including Registered Securities received in exchange for
Bearer Securities, be exchanged for Bearer Securities. (Section 3.05)
Upon surrender for registration of transfer of any Registered Security of
any series at the office or agency of the Company maintained for such purpose,
the Company shall deliver, in the name of the designated transferee, one or more
new Registered Securities of the same series of like aggregate principal amount
of such denominations as are authorized for Registered Securities of such series
and of a like Stated Maturity and with like terms and conditions. No service
charge will be made for any transfer or exchange of Debt Securities, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge payable in connection therewith. (Section 3.05)
The Company shall not be required (i) to register, transfer or exchange
Debt Securities of any series during a period beginning at the opening of
business 15 days before the day of the transmission of a notice of redemption of
Debt Securities of such series selected for redemption and ending at the close
of business on the day of such transmission, or (ii) to register, transfer or
exchange any Debt Security so selected for redemption in whole or in part,
except the unredeemed portion of any Debt Security being redeemed in part.
(Section 3.05)
Events of Default
Under the Indentures, "Event of Default" with respect to the Debt
Securities of any series means any one of the following events (whatever the
reason for such Event of Default and whether it shall be voluntary or
involuntary or be effected by operation of law, pursuant to any judgment, decree
or order of any court or any order, rule or regulation of any administrative or
governmental body): (1) default in the payment of any interest upon any Debt
Security or any payment with respect to the Coupons, if any, of such series when
it becomes due and payable, and continuance of such default for a period of 30
days; (2) default in the payment of the principal of (and premium, if any, on)
any Debt Security of such series at its Maturity; (3) default in the deposit of
any sinking fund payment, when and as due by the terms of a Debt Security of
such series; (4) default in the performance, or breach of any covenant or
warranty in the applicable Indenture (other than a covenant or warranty a
default in whose performance or whose breach is elsewhere in the applicable
Indenture specifically dealt with or which expressly has been included in the
applicable Indenture solely for the benefit of Debt Securities of a series other
than such series), and continuance of such default or breach for a period of 60
days after there has been given to the Company by the applicable Trustee or to
the Company and the applicable Trustee by the Holders of at least 25% in
principal amount of the Outstanding Debt Securities of such series, a written
notice specifying such default or breach and requiring it to be remedied; (5)
certain events of bankruptcy, insolvency or reorganization with respect to the
Company; or (6) any other
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Event of Default provided with respect to Debt Securities of that series
pursuant to the applicable Indenture. (Section 5.01)
Each Indenture requires the Company to file with the applicable Trustee,
annually, an officers' certificate as to the Company's compliance with all
conditions and covenants under the applicable Indenture. (Section 12.02) Each
Indenture provides that the applicable Trustee may withhold notice to the
Holders of a series of Debt Securities of any default (except payment defaults
on such Debt Securities) if it considers such withholding to be in the interest
of the Holders of such series of Debt Securities to do so. (Section 6.02)
If an Event of Default with respect to Debt Securities of any series at the
time outstanding occurs and is continuing, then in every case the applicable
Trustee or the Holders of not less than 25% in principal amount of the
Outstanding Debt Securities of such series may declare the principal amount (or,
if any Debt Securities of such series are Discount Securities, such portion of
the principal amount of such Discount Securities as may be specified in the
terms of such Discount Securities) of the Debt Securities of such series to be
due and payable immediately, by a notice in writing to the Company (and to the
applicable Trustee if given by Holders), and upon any such declaration such
principal amount (or specified amount), plus accrued and unpaid interest (and
premium, if any) shall become immediately due and payable. Upon payment of such
amount in the currency in which such Debt Securities are denominated (except as
otherwise provided in the applicable Indenture or specified in the Prospectus
Supplement), all obligations of the Company in respect of the payment of
principal of the Debt Securities of such series shall terminate. (Section 5.02)
Subject to the provisions of each Indenture relating to the duties of the
applicable Trustee, in case an Event of Default with respect to Debt Securities
of a particular series shall occur and be continuing, the applicable Trustee
shall be under no obligation to exercise any of its rights or powers under such
Indenture at the request, order or direction of any of the Holders of Debt
Securities of that series, unless such Holders shall have offered to the
applicable Trustee reasonable indemnity against the expenses and liabilities
which might be incurred by it in compliance with such request. (Section 5.07)
Subject to such provisions for the indemnification of the applicable Trustee,
the Holders of a majority in principal amount of the Outstanding Debt Securities
of such series shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the applicable Trustee
under such Indenture, or exercising any trust or power conferred on the
applicable Trustee with respect to the Debt Securities of that series provided
that such direction does not conflict with law or with the applicable Indenture.
(Section 5.12)
At any time after such a declaration of acceleration with respect to Debt
Securities of any series has been made and before a judgment or decree for
payment of the money due has been obtained by the applicable Trustee as provided
in the Indentures, the Holders of a majority in principal amount of the
Outstanding Debt Securities of such series, by written notice to the Company and
the applicable Trustee, may rescind and annul such declaration and its
consequences if (1) the Company has paid or deposited with the applicable
Trustee a sum in the currency in which such Debt Securities are denominated
(except as otherwise provided in the applicable Indenture or specified in the
Prospectus Supplement) sufficient to pay (A) all overdue installments of
interest on all Debt Securities or all overdue payments with respect to any
Coupons of such series, (B) the principal of (and premium, if any, on) any Debt
Securities of such series which have become due otherwise than by such
declaration of acceleration and interest thereon at the rate or rates prescribed
therefor in such Debt Securities, (C) to the extent that payment of such
interest is lawful, interest upon overdue installments of interest on each Debt
Security of such series or upon overdue payments on any Coupons of such series
at a rate established for such series, and (D) all sums paid or advanced by the
applicable Trustee and the reasonable compensation, expenses, disbursements and
advances of the applicable Trustee, its agents and counsel; and (2) all Events
of Default with respect to Debt Securities of such series, other than the
nonpayment of the principal of Debt Securities of such series which have become
due solely by such declaration of acceleration, have been cured or waived as
provided in the applicable Indenture. No such rescission and waiver will affect
any subsequent default or impair any right consequent thereon. (Section 5.02)
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Modification or Waiver
Without prior notice to or consent of any Holders, the Company and the
applicable Trustee, at any time and from time to time, may modify the applicable
Indenture for any of the following purposes: (1) to evidence the succession of
another corporation to the rights of the Company and the assumption by such
successor of the covenants and obligations of the Company in the applicable
Indenture and in the Debt Securities and Coupons, if any, issued thereunder; (2)
to add to the covenants of the Company for the benefit of the Holders of all or
any series of Debt Securities and the Coupons, if any, appertaining thereto (and
if such covenants are to be for the benefit of less than all series, stating
that such covenants are expressly being included solely for the benefit of such
series), or to surrender any right or power conferred in the applicable
Indenture upon the Company; (3) to add any additional Events of Default (and if
such Events of Default are to be applicable to less than all series, stating
that such Events of Default are expressly being included solely to be applicable
to such series); (4) to add or change any of the provisions of the applicable
Indenture to such extent as shall be necessary to permit or facilitate the
issuance thereunder of Debt Securities of any series in bearer form, registrable
or not registrable, and with or without Coupons, to permit Bearer Securities to
be issued in exchange for Registered Securities, to permit Bearer Securities to
be issued in exchange for Bearer Securities of other authorized denominations or
to permit the issuance of Debt Securities of any series in uncertificated form,
provided that any such action shall not adversely affect the interests of the
Holders of Debt Securities of any series or any related Coupons in any material
respect; (5) to change or eliminate any of the provisions of the applicable
Indenture, provided that any such change or elimination will become effective
only when there is no Outstanding Debt Security issued thereunder or Coupon of
any series created prior to such modification which is entitled to the benefit
of such provision and as to which such modification would apply; (6) to secure
the Debt Securities issued thereunder; (7) to supplement any of the provisions
of the applicable Indenture to such extent as is necessary to permit or
facilitate the defeasance and discharge of any series of Debt Securities,
provided that any such action will not adversely affect the interests of the
Holders of Debt Securities of such series or any other series of Debt Securities
issued under such Indenture or any related Coupons in any material respect; (8)
to establish the form or terms of Debt Securities and Coupons, if any, as
permitted by the applicable Indenture; (9) to evidence and provide for the
acceptance of appointment thereunder by a successor Trustee with respect to one
or more series of Debt Securities and to add to or change any of the provisions
of the applicable Indenture as is necessary to provide for or facilitate the
administration of the trusts thereunder by more than one Trustee; or (10) to
cure any ambiguity, to correct or supplement any provision in the applicable
Indenture which may be defective or inconsistent with any other provision
therein, to eliminate any conflict between the terms of the applicable Indenture
and the Debt Securities issued thereunder and the TIA or to make any other
provisions with respect to matters or questions arising under the applicable
Indenture which will not be inconsistent with any provision of the applicable
Indenture; provided such other provisions shall not adversely affect the
interests of the Holders of Outstanding Debt Securities or Coupons, if any, of
any series created thereunder prior to such modification in any material
respect. (Section 11.01)
With the written consent of the Holders of not less than a majority in
principal amount of the Outstanding Debt Securities of each series affected by
such modification voting separately, the Company and the applicable Trustee may
modify the applicable Indenture for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of the applicable
Indenture or of modifying in any manner the rights of the Holders of Debt
Securities and Coupons, if any, under the applicable Indenture; provided,
however, that no such modification may, without the consent of the Holder of
each Outstanding Debt Security of each such series affected thereby (1) change
the Stated Maturity of the principal of, or any installment of interest on, any
Debt Security, or reduce the principal amount thereof or the interest thereon or
any premium payable upon redemption thereof, or change the Stated Maturity of or
reduce the amount of any payment to be made with respect to any Coupon, or
change the currency or currencies in which the principal of (and premium, if
any) or interest on such Debt Security is denominated or payable, or reduce the
amount of the principal of a Discount Security that would be due and payable
upon a declaration of acceleration of the Maturity thereof, or adversely affect
the right of repayment or repurchase, if any, at the option of the Holder, or
reduce the amount of, or postpone the date fixed for, any payment under any
sinking fund or analogous provisions for any Debt Security, or impair the right
to institute suit for the enforcement of any payment on or after the Stated
Maturity thereof (or, in the case of redemption, on or after the Redemption
Date), or limit
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the obligation of the Company to maintain a paying agency outside the United
States for payments on Bearer Securities, or adversely affect the right to
convert any Subordinated Debt Security into shares of Common Stock as may be set
forth in the Prospectus Supplement; (2) reduce the percentage in principal
amount of the Outstanding Debt Securities of any series, the consent of whose
Holders is required for any such modification, or the consent of whose Holders
is required for any waiver of compliance with certain provisions of the
applicable Indenture or certain defaults or Events of Default thereunder and
their consequences provided for in such Indenture; (3) modify any of the
provisions of the applicable Indenture relating to modifications and waivers of
defaults and covenants, except to increase any such percentage or to provide
that certain other provisions of the applicable Indenture cannot be modified or
waived without the consent of the Holder of each Outstanding Debt Security of
each series affected thereby; provided, however, that certain of such
modifications may be made without the consent of any Holder of any Debt
Security; or (4) in the case of the Subordinated Indenture, modify any of the
provisions relating to the subordination of the Subordinated Debt Securities in
a manner adverse to the Holders thereof. (Section 11.02)
A modification which changes or eliminates any covenant or other provision
of the applicable Indenture with respect to one or more particular series of
Debt Securities and Coupons, if any, or which modifies the rights of the Holders
of Debt Securities and Coupons of such series with respect to such covenant or
other provision, shall be deemed not to affect the rights under the applicable
Indenture of the Holders of Debt Securities and Coupons, if any, of any other
series. (Section 11.02)
In the case of the Subordinated Indenture, no modification may adversely
affect the rights of any holder of Senior Indebtedness under the subordination
provisions of the Subordinated Indenture without the consent of such holder.
(Section 11.08 of the Subordinated Indenture)
The Holders of not less than a majority in principal amount of the
Outstanding Debt Securities of any series may on behalf of the Holders of all
the Debt Securities of any such series waive, by notice to the applicable
Trustee and the Company, any past default or Event of Default under the
applicable Indenture with respect to such series and its consequences, except a
default (1) in the payment of the principal of (or premium, if any) or interest
on any Debt Security of such series, or in the payment of any sinking fund
installment or analogous obligation with respect to the Debt Securities of such
series, or (2) in respect of a covenant or provision hereof which pursuant to
the second paragraph under "-- Modification or Waiver" cannot be modified or
amended without the consent of the Holder of each Outstanding Debt Security of
such series affected. Upon any such waiver, such default will cease to exist,
and any Event of Default arising therefrom will be deemed to have been cured,
for every purpose of the Debt Securities of such series under the applicable
Indenture, but no such waiver will extend to any subsequent or other default or
Event of Default or impair any right consequent thereon. (Section 5.13)
The Company may omit in any particular instance to comply with certain
covenants in the applicable Indenture (including, if so specified in the
Prospectus Supplement, any covenant not set forth in the applicable Indenture
but specified in the Prospectus Supplement to be applicable to the Debt
Securities of any series issued thereunder, except as otherwise specified in the
Prospectus Supplement, and including the covenants relating to the maintenance
by the Company of its existence, rights and franchises), if before the time for
such compliance the Holders of at least a majority in principal amount of the
Outstanding Debt Securities of such series either waive such compliance in such
instance or generally waive compliance with such provisions, but no such waiver
may extend to or affect any term, provision or condition except to the extent
expressly so waived, and, until such waiver becomes effective, the obligations
of the Company and the duties of the applicable Trustee in respect of any such
provision will remain in full force and effect. (Section 12.09 of the Senior
Indenture; Section 12.07 of the Subordinated Indenture)
Subordination
Upon any distribution of assets of the Company upon the dissolution,
winding up, liquidation or reorganization of the Company, the payment of the
principal of (and premium, if any) and interest on the Subordinated Debt
Securities will be subordinated to the extent provided in the Subordinated
Indenture in right of payment to the prior payment in full of all Senior
Indebtedness, including Senior Debt Securities
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(Sections 16.01 and 16.02 of the Subordinated Indenture), but the obligation of
the Company to make payment of principal (and premium, if any) or interest on
the Subordinated Debt Securities will not otherwise be affected. (Section 16.02
of the Subordinated Indenture) No payment on account of principal (or premium,
if any), sinking funds or interest may be made on the Subordinated Debt
Securities (including, without limitation, payment of any Coupons) unless full
payment of amounts then due for principal, premium, if any, sinking funds and
interest on Senior Indebtedness has been made or duly provided for. (Section
16.03 of the Subordinated Indenture) In the event that, notwithstanding the
foregoing, any payment by the Company described in the foregoing sentence is
received by the Trustee under the Subordinated Indenture, any Paying Agent or
the Holders of any of the Subordinated Debt Securities before all Senior
Indebtedness is paid in full, such payment or distribution shall be paid over to
the holders of such Senior Indebtedness or on their behalf for application to
the payment of all such Senior Indebtedness remaining unpaid until all such
Senior Indebtedness shall have been paid in full, after giving effect to any
concurrent payment or distribution to the holders of such Senior Indebtedness.
Subject to payment in full of Senior Indebtedness, the Holders of the
Subordinated Debt Securities will be subrogated to the rights of the holders of
the Senior Indebtedness to the extent of payments made to the holders of such
Senior Indebtedness out of the distributive share of the Subordinated Debt
Securities. (Section 16.02 of the Subordinated Indenture)
By reason of such subordination, in the event of a distribution of assets
upon insolvency, certain general creditors of the Company may recover more,
ratably, than Holders of the Subordinated Debt Securities. The Subordinated
Indenture provides that the subordination provisions thereof shall not apply to
money and securities held in trust pursuant to the satisfaction and discharge
and the legal defeasance provisions of the Subordinated Indenture. (Sections
4.02 and 15.02 of the Subordinated Indenture)
If this Prospectus is being delivered in connection with the offering of a
series of Subordinated Debt Securities, the accompanying Prospectus Supplement
or the information incorporated by reference therein will set forth the
approximate amount of Senior Indebtedness outstanding as of a recent date.
Discharge, Legal Defeasance and Covenant Defeasance
The applicable Indenture with respect to the Debt Securities of any series
may be discharged, subject to certain terms and conditions, when (1) either (A)
all Debt Securities and the Coupons, if any, of such series have been delivered
to the applicable Trustee for cancellation, or (B) all Debt Securities and the
Coupons, if any, of such series not theretofore delivered to the applicable
Trustee for cancellation (i) have become due and payable, (ii) will become due
and payable at their Stated Maturity within one year, or (iii) are to be called
for redemption within one year under arrangements satisfactory to the applicable
Trustee for the giving of notice by the applicable Trustee, and the Company, in
the case of (i), (ii) or (iii) of subclause (B), has irrevocably deposited or
caused to be deposited with the applicable Trustee as trust funds in trust for
such purpose an amount in the currency in which such Debt Securities are
denominated sufficient to pay and discharge the entire indebtedness on such Debt
Securities for principal (and premium, if any) and interest to the date of such
deposit (in the case of Debt Securities which have become due and payable) or to
the Stated Maturity or Redemption Date, as the case may be; provided, however,
in the event a petition for relief under the applicable Federal or state
bankruptcy, insolvency or other similar law is filed with respect to the Company
within 91 days after the deposit and the applicable Trustee is required to
return the deposited money to the Company, the obligations of the Company under
the applicable Indenture with respect to such Debt Securities will not be deemed
terminated or discharged; (2) the Company has paid or caused to be paid all
other sums payable under the applicable Indenture by the Company; (3) the
Company has delivered to the applicable Trustee an officers' certificate and an
opinion of counsel each stating that all conditions precedent therein provided
relating to the satisfaction and discharge of the applicable Indenture with
respect to such series have been complied with; and (4) the Company has
delivered to the applicable Trustee an opinion of counsel or a ruling of the
Internal Revenue Service to the effect that such deposit and discharge will not
cause the Holders of the Debt Securities of the series to recognize income, gain
or loss for Federal income tax purposes. (Section 4.01)
If provision is made for the defeasance of Debt Securities of a series, and
if the Debt Securities of such series are Registered Securities and denominated
and payable only in U.S. dollars, then the provisions of each
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Indenture relating to defeasance shall be applicable except as otherwise
specified in the Prospectus Supplement for Debt Securities of such series.
Defeasance provisions, if any, for Debt Securities denominated in a foreign
currency or currencies or for Bearer Securities may be specified in the
Prospectus Supplement. (Section 15.01)
At the Company's option, either (a) the Company shall be deemed to have
been Discharged (as defined below) from its obligations with respect to Debt
Securities of any series (including, in the case of Subordinated Debt
Securities, the provisions described under "-- Subordination" herein) ("legal
defeasance option") or (b) the Company shall cease to be under any obligation to
comply with any obligation of the Company in the applicable Indenture including
any restrictive covenants described in the accompanying Prospectus Supplement
and any other covenants applicable to the Debt Securities which are subject to
covenant defeasance (including, in the case of Subordinated Debt Securities, the
provisions described under "-- Subordination" herein) ("covenant defeasance
option") at any time after the applicable conditions set forth below have been
satisfied: (1) the Company shall have deposited or caused to be deposited
irrevocably with the applicable Trustee as trust funds in trust, specifically
pledged as security for, and dedicated solely to, the benefit of the Holders of
the Debt Securities of such series (i) money in an amount, or (ii) U.S.
Government Obligations which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than one
day before the due date of any payment, money in an amount, or (iii) a
combination of (i) and (ii), sufficient, in the opinion (with respect to (i) and
(ii)) of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the applicable
Trustee, to pay and discharge each installment of principal (including any
mandatory sinking fund payments) of (and premium, if any) and interest on, the
Outstanding Debt Securities of such series on the dates such installments of
interest or principal and premium are due; (2) such deposit shall not cause the
applicable Trustee with respect to the Debt Securities of that series to have a
conflicting interest with respect to the Debt Securities of any series; (3) such
deposit will not result in a breach or violation of, or constitute a default
under, the applicable Indenture or any other agreement or instrument to which
the Company is a party or by which it is bound; (4) if the Debt Securities of
such series are then listed on any national securities exchange, the Company
shall have delivered to the applicable Trustee an opinion of counsel or a letter
or other document from such exchange to the effect that the Company's exercise
of its legal defeasance option or the covenant defeasance option, as the case
may be, would not cause such Debt Securities to be delisted; (5) no Event of
Default or event (including such deposit) which, with notice or lapse of time or
both, would become an Event of Default with respect to the Debt Securities of
such series shall have occurred and be continuing on the date of such deposit
and, with respect to the legal defeasance option only, no Event of Default under
the provisions of the applicable Indenture relating to certain events of
bankruptcy or insolvency or event which with the giving of notice or lapse of
time, or both, would become an Event of Default under such bankruptcy or
insolvency provisions shall have occurred and be continuing on the 91st day
after such date; and (6) certain other opinions, officers' certificates and
other documents specified in the applicable Indenture, including an opinion of
counsel or a ruling of the Internal Revenue Service to the effect that such
deposit, defeasance or Discharge will not cause the Holders of the Debt
Securities of such series to recognize income, gain or loss for Federal income
tax purposes. Notwithstanding the foregoing, if the Company exercises its
covenant defeasance option and an Event of Default under the provisions of the
Indentures relating to certain events of bankruptcy or insolvency or event which
with the giving of notice or lapse of time, or both, would become an Event of
Default under such bankruptcy or insolvency provisions shall have occurred and
be continuing on the 91st day after the date of such deposit, the obligations of
the Company referred to under the definition of covenant defeasance option with
respect to such Debt Securities shall be reinstated in full. (Section 15.02)
Payment and Paying Agents
If Debt Securities of a series are issuable only as Registered Securities,
the Company will maintain in each Place of Payment for such series an office or
agency where Debt Securities of that series may be presented or surrendered for
payment, where Debt Securities of that series may be surrendered for
registration of transfer or exchange and where notices and demands to or upon
the Company in respect of the Debt Securities of that series and the applicable
Indenture may be served. (Section 12.03)
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If Debt Securities of a series are issuable as Bearer Securities, the
Company will maintain (A) in the Borough of Manhattan, The City and State of New
York, an office or agency where any Registered Securities of that series may be
presented or surrendered for payment, where any Registered Securities of that
series may be surrendered for registration of transfer, where Debt Securities of
that series may be surrendered for exchange or redemption, where Subordinated
Debt Securities of that series that are convertible may be surrendered for
conversion, where notices and demands to or upon the Company in respect of the
Debt Securities of that series and the applicable Indenture may be served and
where Bearer Securities of that series and related Coupons may be presented or
surrendered for payment in the circumstances described in the following
paragraph (and not otherwise), (B) subject to any laws or regulations applicable
thereto, in a Place of Payment for that series which is located outside the
United States, an office or agency where Debt Securities of that series and
related Coupons may be presented and surrendered for payment (including payment
of any additional amounts payable on Debt Securities of that series, if so
provided in such series; provided, however, that if the Debt Securities of that
series are listed on The Stock Exchange of the United Kingdom and the Republic
of Ireland, the Luxembourg Stock Exchange or any other stock exchange located
outside the United States and such stock exchange shall so require, the Company
will maintain a Paying Agent for the Debt Securities of that series in London,
Luxembourg or any other required city located outside the United States, as the
case may be, so long as the Debt Securities of that series are listed on such
exchange, and (C) subject to any laws or regulations applicable thereto, in a
Place of Payment for that series located outside the United States an office or
agency where any Registered Securities of that series may be surrendered for
registration of transfer, where Debt Securities of that series may be
surrendered for exchange or redemption, where Subordinated Debt Securities of
that series that are convertible may be surrendered for conversion and where
notices and demands to or upon the Company in respect of the Debt Securities of
that series and the applicable Indenture may be served. The Company will give
prompt written notice to the applicable Trustee of the locations, and any change
in the locations, of such offices or agencies. If at any time the Company shall
fail to maintain any such required office or agency or shall fail to furnish the
applicable Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the corporate trust office of the
applicable Trustee, except that Bearer Securities of that series and the related
coupons may be presented and surrendered for payment at the offices specified in
the applicable Debt Security and the Company has appointed the applicable
Trustee (or in the case of Bearer Securities may appoint such other agent as may
be specified in the applicable Prospectus Supplement) as its agent to receive
all presentations, surrenders, notices and demands. (Section 12.03)
No payment of principal, premium or interest on Bearer Securities shall be
made at any office or agency of the Company in the United States or by check
mailed to any address in the United States or by transfer to an account
maintained with a bank located in the United States; provided, however, that, if
the Debt Securities of a series are denominated and payable in U.S. dollars,
payment of principal of and any premium and interest on Bearer Securities of
such series, if specified in the applicable Prospectus Supplement, shall be made
at the office of the applicable Trustee or the Company's Paying Agent in the
Borough of Manhattan, the City and State of New York, if (but only if) payment
in U.S. dollars of the full amount of such principal, premium, interest or
additional amounts, as the case may be, at all offices or agencies outside the
United States maintained for the purpose by the Company in accordance with the
applicable Indenture is illegal or effectively precluded by exchange controls or
other similar restrictions. (Section 12.03)
Book-Entry Debt Securities
The Debt Securities of a series may be issued in whole or in part in global
form that will be deposited with, or on behalf of, a depositary identified in
the Prospectus Supplement. Global Notes may be issued in either registered or
bearer form and in either temporary or permanent form (each a "Global Note").
Payments of principal of (and premium, if any) and interest on Debt Securities
represented by a Global Note will be made by the Company to the applicable
Trustee and then by such Trustee to the depositary.
If specified in the applicable Prospectus Supplement, any Global Notes will
be deposited with, or on behalf of, The Depository Trust Company, New York, New
York ("DTC"), as depositary, or such other depositary as may be specified in the
applicable Prospectus Supplement. In the event that DTC acts as
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depositary with respect to any Global Notes, the Company anticipates that such
Global Notes will be registered in the name of DTC's nominee, and that the
following provisions will apply to the depositary arrangements with respect to
any such Global Notes. Additional or differing terms of the depositary
arrangements, if any, applicable to the Offered Debt Securities, will be
described in the accompanying Prospectus Supplement.
So long as DTC or its nominee is the registered owner of a Global Note, DTC
or its nominee, as the case may be, will be considered the sole Holder of the
Debt Securities represented by such Global Note for all purposes under the
applicable Indenture. Except as provided below, owners of beneficial interests
in a Global Note will not be entitled to have Debt Securities represented by
such Global Note registered in their names, will not receive or be entitled to
receive physical delivery or Debt Securities in certificated form and will not
be considered the owners or Holders thereof under the applicable Indenture. The
laws of some states require that certain purchasers of securities take physical
delivery of such securities in certificated form; accordingly, such laws may
limit the transferability of beneficial interests in a Global Note.
If DTC is at any time unwilling or unable to continue as depositary and a
successor depositary is not appointed by the Company within 90 days, the Company
will issue individual Debt Securities in certificated form in exchange for the
Global Notes. In addition, the Company may at any time, and in its sole
discretion, determine not to have any Debt Securities represented by one or more
Global Notes and, in such event, will issue individual Debt Securities in
certificated form in exchange for the relevant Global Notes. If Registered
Securities of any series shall have been issued in the form of one or more
Global Notes and if an Event of Default with respect to the Debt Securities of
such series shall have occurred and be continuing, the Company will issue
individual Debt Securities in certificated form in exchange for the relevant
Global Notes. (Section 3.04)
The following is based on information furnished by DTC:
DTC is a limited-purpose trust company organized under the Banking Law of
the State of New York, a "banking organization" within the meaning of the
Banking Law of the State of New York, a member of the Federal Reserve System, a
clearing corporation within the meaning of the New York Uniform Commercial Code,
and a "clearing agency" registered pursuant to the provisions of Section 17A of
the Exchange Act. DTC holds securities that its participants ("Participants")
deposit with DTC. DTC also facilitates the settlement among Participants of
securities transactions, such as transfers and pledges, in deposited securities
through electronic computerized book-entry changes in Participants' accounts,
thereby eliminating the need for physical movement of securities certificates.
Direct Participants include securities brokers and dealers, banks, trust
companies, clearing corporations and certain other organizations ("Direct
Participants"). DTC is owned by a number of its Direct Participants and by the
New York Stock Exchange, Inc., the American Stock Exchange, Inc. and the
National Association of Securities Dealers, Inc. Access to the DTC system is
also available to others such as securities brokers and dealers, banks and trust
companies that clear through or maintain a custodial relationship with a Direct
Participant, either directly or indirectly ("Indirect Participants"). The rules
applicable to DTC and its Participants are on file with the Commission.
Purchases of Debt Securities under the DTC system must be made by or
through Direct Participants, which will receive a credit for the Debt Securities
on DTC's records. The ownership interest of each actual purchaser of each Debt
Security ("Beneficial Owner") is in turn recorded on the Direct and Indirect
Participants' records. A Beneficial Owner does not receive written confirmation
from DTC of its purchase, but such Beneficial Owner is expected to receive a
written confirmation providing details of the transaction, as well as periodic
statements of its holdings, from the Direct or Indirect Participant through
which such Beneficial Owner entered into the transaction. Transfers of ownership
interests in Debt Securities are accomplished by entries made on the books of
Participants acting on behalf of Beneficial Owners. Beneficial Owners do not
receive certificates representing their ownership interests in Debt Securities,
except in the event that use of the book entry system for the Debt Securities is
discontinued.
To facilitate subsequent transfers, the Debt Securities are registered in
the name of DTC's partnership nominee, Cede & Co. The deposit of the Debt
Securities with DTC and their registration in the name of Cede & Co. effects no
change in beneficial ownership. DTC has no knowledge of the actual Beneficial
Owners of the
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Debt Securities; DTC records reflect only the identity of the Direct
Participants to whose accounts Debt Securities are credited, which may or may
not be the Beneficial Owners. The Participants remain responsible for keeping
account of their holdings on behalf of their customers.
Delivery of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants, and by Direct Participants and
Indirect Participants to Beneficial Owners are governed by arrangements among
them, subject to any statutory or regulatory requirements as may be in effect
from time to time.
Neither DTC nor Cede & Co. will consent or vote with respect to the Debt
Securities. Under its usual procedures, DTC mails a proxy (an "Omnibus Proxy")
to the issuer as soon as possible after the record date. The Omnibus Proxy
assigns Cede & Co.'s consenting or voting rights to those Direct Participants to
whose accounts the Debt Securities are credited on the record date (identified
on a list attached to the Omnibus Proxy).
Principal and interest payments on the Debt Securities will be made to DTC.
DTC's practice is to credit Direct Participants' accounts on the payable date in
accordance with their respective holdings as shown on DTC's records unless DTC
has reason to believe that it will not receive payment on the payable date.
Payments by Participants to Beneficial Owners will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such Participant and not of DTC, the Paying Agent
or the Company, subject to any statutory or regulatory requirements as may be in
effect from time to time. Payment of principal and interest to DTC is the
responsibility of the Company or the Paying Agent, disbursement of such payments
to Direct Participants is the responsibility of DTC, and disbursement of such
payments to the Beneficial Owners will be the responsibility of Direct and
Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to the Debt Securities at any time by giving reasonable notice to the
Company or the Paying Agent. Under such circumstances, in the event that a
successor securities depositary is not appointed, Debt Security certificates are
required to be printed and delivered.
The Company may decide to discontinue use of the system of book-entry
transfers through DTC (or a successor securities depositary). In that event,
Debt Security certificates will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources (including DTC) that the Company believes to be
reliable, but the Company takes no responsibility for the accuracy thereof.
Unless stated otherwise in the applicable Prospectus Supplement, the
underwriters or agents with respect to a series of Debt Securities issued as
Global Notes will be Direct Participants in DTC.
None of the Company, any underwriter or agent, the applicable Trustee or
any applicable Paying Agent will have the responsibility or liability for any
aspect of the records relating to or payments made on account of beneficial
interests in a Global Note, or for maintaining, supervising or reviewing any
records relating to such beneficial interests.
Conversion or Exchange Rights
The terms and conditions, if any, upon which Subordinated Debt Securities
being offered are convertible or exchangeable into Common Stock will be set
forth in the Prospectus Supplement relating thereto. Such terms will include the
conversion or exchange price, the conversion or exchange period, provisions as
to whether conversion or exchange will be at the option of the Holder or the
Company, the events requiring an adjustment of the conversion or exchange price
and provisions affecting conversions or exchanges in the event of the redemption
of such Subordinated Debt Securities.
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Concerning the Trustees
The Company may from time to time maintain deposit accounts and conduct
other banking transactions with The First National Bank of Chicago or State
Street Bank and Trust Company and their affiliated entities in the ordinary
course of business.
Certain Definitions
Set forth below is summary of certain defined terms used in the applicable
Indenture. Reference is made to the applicable Indenture for the full definition
of all such terms.
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Debt Securities of such series and to have satisfied all the obligations under
the applicable Indenture relating to the Debt Securities of such series, except
(i) the right of Holders of Debt Securities of such series to receive, from the
trust fund described under "Discharge, Legal Defeasance and Covenant Defeasance"
above, payment of the principal of (and premium, if any) and interest on such
Debt Securities when such payments are due, (ii) the Company's obligations with
respect to the Debt Securities of such series under the provisions relating to
exchanges, transfers and replacement of Debt Securities, the maintenance of an
office or agency of the Company and the defeasance trust fund, the provisions
relating to compensation and reimbursement of the applicable Trustee and (iii)
the rights, powers, trusts, duties and immunities of the applicable Trustee
thereunder. (Section 15.02)
"Indebtedness" means (i) any liability of any Persons (a) for borrowed
money, or (b) evidenced by a bond, note, debenture or similar instrument
(including purchase money obligations but excluding trade payables), or (c) for
the payment of money relating to a lease that is required to be classified as a
capitalized lease obligation in accordance with generally accepted accounting
principles, or (d) preferred or preference stock of a Subsidiary of the Company
held by Persons other than the Company or a Subsidiary of the Company; (ii) any
liability of others described in the preceding clause (i) that the Person has
guaranteed, that is recourse to such Person or that is otherwise its legal
liability; and (iii) any amendment, supplement, modification, deferral, renewal,
extension or refunding of any liability of the types referred to in clauses (i)
and (ii) above. (Section 1.01)
"Senior Indebtedness" means the principal of (and premium, if any) and
unpaid interest on (i) Indebtedness of the Company, whether outstanding on the
date of the Subordinated Indenture or thereafter created, incurred, assumed or
guaranteed, for money borrowed (other than the Indebtedness evidenced by the
Subordinated Debt Securities of any series), unless in the instrument creating
or evidencing the same or pursuant to which the same is outstanding it is
provided that such Indebtedness is not senior or prior in right of payment to
the Subordinated Debt Securities or is pari passu or subordinate by its terms in
right of payment to the Subordinated Debt Securities and (ii) renewals,
extensions and modifications of any such Indebtedness. (Section 1.01 of the
Subordinated Indenture)
"Subsidiary" means any Corporation of which at least a majority of the
outstanding stock having by the terms thereof ordinary voting power to elect a
majority of the directors of such Corporation, irrespective of whether or not at
the time stock of any other class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency, is at the
time, directly or indirectly, owned or controlled by the Company or by one or
more Subsidiaries thereof, or by the Company and one or more Subsidiaries
thereof. (Section 1.01)
"U.S. Government Obligations" means securities that are (i) direct
obligations of the United States for the timely payment of which its full faith
and credit is pledged, or (ii) obligations of a Person controlled or supervised
by and acting as an agency or instrumentality of the United States the payment
of which is unconditionally guaranteed as a full faith and credit obligation by
the United States, which, in either case under clauses (i) or (ii), are not
callable or redeemable at the option of the issuer thereof, and shall also
include a depository receipt issued by a bank or trust company as custodian with
respect to any such U.S. Government Obligation or a specific payment of interest
on (or principal of) any such U.S. Government Obligation held by such custodian
for the account of the holder of a depository receipt; provided that (except
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as required by law) such custodian is not authorized to make any deduction from
the amount payable to the holder of such depository receipt from any amount
received by the custodian in respect of the U.S. Government Obligation or the
specific payment of interest on or principal of the U.S. Government Obligation
evidenced by such depository receipt. (Section 15.02)
PREFERRED STOCK
The description of certain provisions of the Preferred Stock set forth
below and in any Prospectus Supplement does not purport to be complete and is
subject to and qualified in its entirety by reference to the Company's Articles
of Incorporation and the Articles of Amendment relating to each such series of
Preferred Stock, which will be filed with the Commission in connection with the
offering of such series of Preferred Stock.
General
Under the Company's Articles of Incorporation, the Board of Directors may,
by resolution, establish series of Preferred Stock having such voting powers,
and such designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or restrictions thereof,
as the Board of Directors may determine.
The Preferred Stock offered hereby will have the dividend, liquidation and
voting rights set forth below unless otherwise provided in the Prospectus
Supplement relating to a particular series of Preferred Stock. Reference is made
to the Prospectus Supplement relating to the particular series of Preferred
Stock offered thereby for specific terms, including: (1) the designation and
stated value per share of such Preferred Stock and the number of shares offered;
(2) the amount of liquidation preference per share; (3) the price at which such
Preferred Stock will be issued; (4) the dividend rate (or method of
calculation), the dates on which dividends will be payable, whether such
dividends will be cumulative or noncumulative and, if cumulative, the dates from
which dividends will commence to cumulate; (5) any redemption or sinking fund
provisions; (6) any terms by which such series of Preferred Stock may be
convertible into or exchanged for Common Stock or Debt Securities; and (7) any
additional or other rights, preferences, privileges, limitations and
restrictions relating to such series of Preferred Stock.
The Preferred Stock offered hereby will be issued in one or more series.
The holders of Preferred Stock will have no preemptive rights. Preferred Stock
will be fully paid and nonassessable upon issuance against full payment of the
purchase price therefor. Unless otherwise specified in the Prospectus Supplement
relating to a particular series of Preferred Stock, each series of Preferred
Stock will, with respect to dividend rights and rights on liquidation,
dissolution and winding up of the Company, rank prior to the Common Stock (the
"Junior Stock") and on a parity with each other series of Preferred Stock
offered hereby (the "Parity Stock").
Dividend Rights
Holders of the Preferred Stock of each series will be entitled to receive,
when, as and if declared by the Board of Directors of the Company, out of funds
legally available therefor, cash dividends at such rates and on such dates as
are set forth in the Prospectus Supplement relating to such series of Preferred
Stock. Such rate may be fixed or variable or both. Each such dividend will be
payable to the holders of record as they appear on the stock books of the
Company on such record dates as will be fixed by the Board of Directors of the
Company. Dividends on any series of the Preferred Stock may be cumulative or
noncumulative, as provided in the Prospectus Supplement relating thereto. If the
Board of Directors of the Company fails to declare a dividend payable on a
dividend payment date on any series of Preferred Stock for which dividends are
noncumulative, then the right to receive a dividend in respect of the dividend
period ending on such dividend payment date will be lost, and the Company will
have no obligation to pay the dividend accrued for that period, whether or not
dividends are declared for any future period. Dividends on shares of each series
of Preferred Stock for which dividends are cumulative will accrue from the date
set forth in the applicable Prospectus Supplement.
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The Preferred Stock of each series will include customary provisions (1)
restricting the payment of dividends or the making of other distributions on, or
the redemption, purchase or other acquisition of, Junior Stock unless full
dividends, including, in the case of cumulative Preferred Stock, accruals, if
any, in respect of prior dividend periods, on the shares of such series of
Preferred Stock have been paid and (2) providing for the pro rata payment of
dividends on such series and other Parity Stock when dividends have not been
paid in full upon such series and other Parity Stock.
Rights Upon Liquidation
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, the holders of each series of Preferred Stock will be
entitled to receive out of assets of the Company available for distribution to
stockholders, before any distribution of assets is made to holders of Junior
Stock, liquidating distributions in the amount set forth in the Prospectus
Supplement relating to such series of Preferred Stock plus an amount equal to
accrued and unpaid dividends. If, upon any voluntary or involuntary liquidation,
dissolution or winding up of the Company, the amounts payable with respect to
the Preferred Stock of any series and any Parity Stock are not paid in full, the
holders of the Preferred Stock of such series and of such Parity Stock will
share ratably in any such distribution of assets of the Company in proportion to
the full respective preferential amounts (which may include accumulated
dividends) to which they are entitled. After payment of the full amount of the
liquidating distribution to which they are entitled, the holders of such series
of Preferred Stock will have no right or claim to any of the remaining assets of
the Company. Neither the sale of all or a portion of the Company's assets nor
the merger or consolidation of the Company into or with any other corporation
shall be deemed to be a dissolution, liquidation or winding up, voluntarily or
involuntarily, of the Company.
Voting Rights
The holders of Preferred Stock of a series offered hereby will not be
entitled to vote except as indicated in the Prospectus Supplement relating to
such series of Preferred Stock or as required by applicable law. Unless
otherwise specified in the Prospectus Supplement relating to a particular series
of Preferred Stock, when and if any such series is entitled to vote, each share
in such series will be entitled to one vote.
DESCRIPTION OF CAPITAL STOCK
GENERAL
Set forth below is a description of the material terms and provisions of
the equity securities of the Company. The following description does not purport
to be complete and is subject to and qualified in its entirety by reference to
the Articles of Incorporation, as amended, of the Company (the "Articles of
Incorporation") and the By-Laws, as amended, of the Company (the "By-Laws") and
the Rights Plan of the Company dated as of July 27, 1994 between the Company and
Chemical Bank, as Rights Agent (the "Rights Plan"). The Articles of
Incorporation are an exhibit to the Company's Annual Report on Form 10-K for the
year ended December 31, 1994, as amended by Amendment No. 1 on Form 10-K/A, the
form of Articles of Amendment of Articles of Incorporation for the PRIDES (as
defined herein) is an exhibit to the Company's Current Report on Form 8-K dated
May 25, 1995, the By-Laws are an exhibit to the Company's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1995, and the Rights Plan is an
exhibit to Company's Registration Statement on Form 8-A. Amendments to the
Articles of Incorporation set forth in the Proxy Statement dated May 1, 1995
were approved at the Annual Meeting of Shareholders on June 14, 1995.
The Company is authorized to issue (i) 100,000,000 shares of Common Stock,
par value $2.00 per share and (ii) 20,000,000 shares of Preferred Stock, par
value $2.00 per share, which may be issued in one or more series with such
voting powers, designations, preferences, rights, qualifications, limitations
and restrictions as shall be specified by the Board of Directors. The Board of
Directors may issue one or more series of preferred stock with voting and
conversion rights which could adversely affect the voting power of the holders
of Common Stock and the holders of other series of Preferred Stock, and which
could, among other things, have the effect of delaying, deferring or preventing
a change in control of the Company. In connection with the
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Rights Plan, the Board of Directors authorized the issuance of 1,000,000 shares
of Series A Junior Participating Preferred Stock to holders of rights issued
under the Rights Plan. See "-- Rights Plan" below.
As of June 16, 1995, 13,913,544 shares of Common Stock were issued and
outstanding, excluding 579,841 treasury shares, and 1,955,000 shares of
Preferred Redeemable Increased Dividend Equity SecuritiesSM, 6 3/4% PRIDESSM,
Convertible Preferred Stock, par value $2.00 per share ("PRIDESSM") were issued
and outstanding.
COMMON STOCK
Dividends
Holders of the Company's Common Stock are entitled to receive such
dividends as may be legally declared by the Board of Directors. The declaration
and amount of future dividends may depend, in part, on restrictive covenants
contained in certain loan agreements and certain state regulations regarding
minimum capitalization requirements for insurance companies that have the effect
of limiting dividends from UCLIC and UG Title to the Company.
Voting Rights
Holders of Common Stock are entitled to one vote for each share held of
record. Except as discussed below, action of the stockholders may generally be
taken by the affirmative vote of a majority of the shares present or represented
at a duly called meeting at which a quorum is present or represented.
Other Rights
Holders of Common Stock have no preemptive or subscription rights and have
no liability for further calls or assessments. All shares of Common Stock are
entitled to share ratably in the net assets of the Company upon liquidation.
The transfer agent and registrar for the Common Stock is Chemical Bank of
New York, New York.
PRIDES
General
The PRIDES are shares of convertible preferred stock and rank prior to the
Common Stock as to payment of dividends and distribution of assets upon
liquidation. The shares of PRIDES mandatorily convert into shares of Common
Stock on July 1, 2000 (the "Mandatory Conversion Date") and the Company has the
option to redeem the shares of PRIDES, in whole or in part, at any time and from
time to time on or after July 1, 1998, and prior to the Mandatory Conversion
Date at the Call Price (as defined herein), payable in shares of Common Stock.
In addition, the shares of PRIDES are convertible into shares of Common Stock at
the option of the holder at any time prior to the Mandatory Conversion Date as
set forth below.
Dividends
Holders of shares of PRIDES are entitled to receive annual cumulative
dividends at a rate per annum of 6 3/4% of the stated liquidation preference
(equivalent to a rate of $2.97 per annum for each share of PRIDES), from the
date of initial issuance, payable quarterly in arrears on each January 1, April
1, July 1, and October 1, or, if any such date is not a business day, on the
next succeeding business day, commencing July 1, 1995.
Mandatory Conversion
On the Mandatory Conversion Date, unless previously redeemed or converted,
each outstanding share of PRIDES are mandatorily convertible into (i) one share
of Common Stock, subject to adjustment in certain events, and (ii) the right to
receive cash in an amount equal to all accrued and unpaid dividends thereon
(other than previously declared dividends payable to a holder of record as of a
prior date).
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Optional Redemption
Shares of PRIDES are not redeemable prior to July 1, 1998. At any time and
from time to time on or after July 1, 1998, and ending immediately prior to the
Mandatory Conversion Date, the Company may redeem any or all of the outstanding
shares of PRIDES. Upon any such redemption, each holder will receive, in
exchange for each share of PRIDES, the number of shares of Common Stock equal to
the Call Price divided by the Current Market Price (as defined herein) on the
applicable date of determination, but in no event less than .826 of a share of
Common Stock, subject to adjustment as described herein. The number of shares of
Common Stock to be delivered in payment of the applicable Call Price will be
determined on the basis of the Current Market Price of the Common Stock prior to
the announcement of the redemption, and the market price of the Common Stock may
vary between the date of such determination and the subsequent delivery of such
shares.
The "Call Price" of each share of PRIDES is the sum of (i) $45.188 on and
after July 1, 1998, to and including September 30, 1998, $45.040 on and after
October 1, 1998, to and including December 31, 1998, $44.891 on and after
January 1, 1999, to and including March 31, 1999, $44.743 on and after April 1,
1999, to and including June 30, 1999, $44.594 on and after July 1, 1999, to and
including September 30, 1999, $44.446 on and after October 1, 1999, to and
including December 31, 1999, $44.297 on and after January 1, 2000, to and
including March 31, 2000, $44.149 on and after April 1, 2000, to and including
May 31, 2000, and $44.00, on and after June 1, 2000, to and including July 1,
2000, and (ii) all accrued and unpaid dividends thereon to but not including the
date fixed for redemption (other than previously declared dividends payable to a
holder of record as of a prior date).
The "Current Market Price" per share of the Common Stock on any date of
determination means the lesser of (x) the average of the Closing Prices (as
defined below) of the Common Stock for the 15 consecutive trading days ending on
and including such date of determination and (y) the Closing Price of the Common
Stock for such date of determination; provided, however, that, with respect to
any redemption of shares of PRIDES, if any event resulting in an adjustment of
the Common Equivalent Rate occurs during the period beginning on the first day
of such 15-day period and ending on the applicable redemption date, the Current
Market Price as determined pursuant to the foregoing will be appropriately
adjusted to reflect the occurrence of such event. The term "Closing Price" on
any day means the last reported sales price on such day or, in case no such sale
takes place on such day, the average of the reported closing high and low
quotations, in each case on the Nasdaq National Market, or, if the Common Stock
is not listed on the Nasdaq National Market, on the principal national
securities exchange on which the Common Stock is listed or admitted to trading,
or, if not listed or admitted to trading on any national securities exchange,
the average of the high bid and low-asked quotations of the Common Stock in the
over-the-counter market on the day in question as reported by the National
Quotation Bureau Incorporated, or a similarly generally accepted reporting
service, or, if no such quotations are available, the fair market value of the
Common Stock as determined by any New York Stock Exchange member firm selected
from time to time by the Board of Directors of the Company for such purpose.
The "Common Equivalent Rate" is initially one share of Common Stock for
each share of PRIDES and is subject to adjustment as appropriate in certain
circumstances, including if the Company shall (a) pay a stock dividend or make a
distribution with respect to its Common Stock in shares of Common Stock, (b)
subdivide or split its outstanding Common Stock, (c) combine its outstanding
Common Stock into a smaller number of shares, (d) issue by reclassification of
its shares of Common Stock any shares of Common Stock, (e) issue certain rights
(excluding the Rights (as defined under "Description of Capital Stock -- Rights
Plan")) or warrants to all holders of its Common Stock unless such rights or
warrants are issued to each holder of shares of PRIDES on a pro rata basis with
the shares of Common Stock based on the Common Equivalent Rate in effect on the
date immediately preceding such issuance, or (f) pay a dividend or distribute to
all holders of its Common Stock evidences of its indebtedness, cash or other
assets (including capital stock of the Company but excluding any cash dividends
or distributions, other than certain extraordinary cash distributions, and
dividends referred to in clause (a) above) unless such dividend or distribution
is made to each holder of shares of PRIDES on a pro rata basis with the shares
of Common Stock based on the Common Equivalent Rate in effect on the date
immediately preceding such dividend or distribution.
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Conversion at the Option of the Holder
At any time prior to the Mandatory Conversion Date, unless previously
redeemed, each share of PRIDES is convertible at the option of the holder
thereof into .826 of a share of Common Stock (the "Optional Conversion Rate"),
equivalent to the Conversion Price of $53.24 per share of Common Stock, subject
to adjustment as described herein. The number of shares of Common Stock a holder
will receive upon redemption, and the value of the shares received upon
conversion, will vary depending on the market price of the Common Stock from
time to time, all as set forth herein. The right of holders to convert shares of
PRIDES called for redemption will terminate immediately prior to the close of
business on the redemption date.
Voting Rights
The holders of shares of PRIDES have the right with the holders of Common
Stock to vote in the election of Directors and upon each other matter coming
before any meeting of the holders of Common Stock on the basis of 4/5 of a vote
for each share of PRIDES. On such matters, the holders of shares of PRIDES and
the holders of Common Stock will vote together as one class except as otherwise
provided by law or the Company's Articles of Incorporation. In addition, (i)
whenever dividends on the shares of PRIDES or any other series of the Company's
preferred stock (all series of which, including the shares of PRIDES,
hereinafter are called the "Preferred Stock") with like voting rights are in
arrears and unpaid for six quarterly dividend periods, and in certain other
circumstances, the holders of the shares of PRIDES (voting separately as a
class) will be entitled to vote, on the basis of one vote for each share of
PRIDES, for the election of two Directors of the Company, such Directors to be
in addition to the number of Directors constituting the Board of Directors
immediately prior to the accrual of such right, and (ii) the holders of the
shares of PRIDES may have voting rights with respect to certain alterations of
the Company's Articles of Incorporation and certain other matters, voting on the
same basis or separately as a series.
Liquidation Preference and Ranking
The shares of PRIDES rank prior to the Common Stock as to payment of
dividends and distribution of assets upon liquidation. The liquidation
preference of each share of PRIDES is an amount equal to the sum of (i) $44.00
and (ii) all accrued and unpaid dividends thereon.
SPECIAL CHARTER, BY-LAW AND LOUISIANA LAW PROVISIONS
Certain provisions of the Company's Articles of Incorporation, the
Company's By-Laws, Louisiana law, and the Company's Rights Plan, may have the
effect of delaying, deterring or discouraging, among other things, a
non-negotiated tender or exchange offer for the Company's Common Stock or a
proxy contest for control of the Company.
Anti-Takeover Provisions in the Company's Articles of Incorporation and
By-Laws
On January 31, 1995, the Company's Board of Directors adopted several
amendments to the Company's By-Laws, to be effective as of January 31, 1995,
which amendments, among other things: (1) authorize the Board of Directors
exclusively to fix the number of directors by no less than a 66 2/3% vote and
classify the Board into three classes with staggered terms; (2) provide
procedures for the removal of directors and for filling vacancies on the Board;
(3) provide advance notice procedures for shareholder nominations and proposals;
and (4) provide procedures for the calling of a special meeting of the
shareholders.
In addition, on June 14, 1995 the Company's shareholders approved
amendments to its Articles of Incorporation to, among other things, require the
affirmative vote of the holders of not less than 80% of the total voting power
of the Company to alter, amend or repeal the foregoing amendments to the
Company's By-Laws that were adopted by the Board of Directors on January 31,
1995.
Other amendments to the Company's Articles of Incorporation approved by the
Company's shareholders on June 14, 1995: (a) provide that no action may be taken
by the shareholders except at an annual or special
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meeting; (b) provide that a special meeting of the shareholders may be called
only by a written request signed by the holders of no less than 66 2/3% of the
total voting power of the Company; (c) provide that amendments (a) and (b) may
not be amended, altered or repealed except by the affirmative vote of the
holders of no less than 80% of the total voting power of the Company; and (d)
eliminate the right of a director absent from a meeting of the Board or any
committee thereof to give a proxy to another director or to a shareholder.
Taken together, the amendments to the Articles of Incorporation and By-Laws
of the Company approved by the Company's shareholders on June 14, 1995 (which
amendments may not be amended, altered or repealed without the 80% shareholder
vote) make more difficult, and thus may discourage, any attempt to gain control
of the Company through a proxy contest or through the acquisition of the
Company's Common Stock, and as a result, will tend to perpetuate the control of
present management. The 80% voting requirements in certain provisions of the
amendments could allow the holders of just over 20% of the total voting power of
the Company to defeat proposed actions that might be supported by persons
holding a majority of the total voting power of the Company. As of March 31,
1995, the directors and executive officers of the Company were the beneficial
owners of 10.893% of the outstanding shares of Common Stock.
The Company's Articles of Incorporation contain other provisions that have
intended "anti-takeover" effects. The Articles of Incorporation of the Company
include certain provisions (the "Special Vote Provisions") requiring the
affirmative vote of 80% of the outstanding shares of the Company's voting stock
before the Company may enter into (i) a merger or consolidation with any other
corporation, (ii) a sale or lease of substantially all of the assets of the
Company to any other corporation, person or entity, or (iii) a sale or lease to
the Company by any other corporation, person or other entity of assets having a
value greater than $1 million in exchange for voting stock of the Company, in
each case if such other corporation, person or other entity, directly or
indirectly, owns or controls 10% or more of the Company's voting stock prior to
any such transaction. The Special Vote Provisions apply only to the
above-described transactions which do not receive prior approval of the Board of
Directors.
The Articles of Incorporation of the Company also contain certain
provisions (the "Takeover Consideration Provisions") authorizing the Board of
Directors, in evaluating an offer from a third party to merge with or acquire
the shares or assets of the Company, to give due consideration to certain
factors not directly related either to the price per share offered for or the
then market price of the Company's Common Stock. The factors that the Board of
Directors is authorized to consider under the Takeover Consideration Provisions
include, without limitation: (i) the consideration being offered in the
acquisition proposal as it relates to the then current value of the Company in a
freely negotiated transaction, and to the Board of Directors' then estimate of
the future value of the Company as an independent entity; (ii) the social, legal
and economic effects of the acquisition proposal on the Company and its
subsidiaries, and the franchisees, employees, suppliers, customers, creditors
and business of the Company and its subsidiaries; (iii) the financial condition
and earnings prospects of the potential offeror, including but not limited to,
debt service and other existing or likely financial obligations of the potential
offeror, and the possible effect of such condition upon the Company and its
subsidiaries and other elements of the communities in which the Company and its
subsidiaries operate or are located; and (iv) the competence, experience and
integrity of the potential offeror.
Pursuant to Section 92G of the Louisiana Business Corporation Law (the
"LBCL"), the Board of Directors is also authorized to consider the factors set
forth therein (which are generally comparable to those set forth in the Takeover
Consideration Provisions) and any other factors which it deems relevant in
evaluating a tender offer or an offer to make a tender or exchange offer or to
effect a merger or consolidation.
The Special Vote Provisions and the Takeover Consideration Provisions may
be altered only by the affirmative vote of 80% of the outstanding shares of the
Company's voting stock.
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Directors' and Officers' Exculpation and Indemnification
The Articles of Incorporation provide that no director or officer of the
Company shall be personally liable to the Company or its stockholders for
monetary damages for breach of fiduciary duty as a director or officer except
for liability (i) for breach of the director's or officer's duty of loyalty to
the Company or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 92D of the LBCL, which specifies certain corporate transactions, such as
certain dividend declarations and dispositions of assets, as unlawful, or (iv)
for any transaction from which the director or officer derived an improper
personal benefit. With the exception of the items noted in (i) through (iv)
above, the effect of this provision of the Articles of Incorporation is to
eliminate the rights of the Company and its stockholders (through stockholders'
derivative suits on behalf of the Company) to recover monetary damages against a
director or officer for breach of his or her fiduciary duty as a director or
officer. This provision does not limit or eliminate the rights of the Company or
any stockholders to seek non-monetary relief, such as an injunction or
rescission in the event of a breach of a director's or officer's fiduciary duty.
Pursuant to Section 83 of the LBCL, the Company has adopted provisions in
its Articles of Incorporation which require the Company to indemnify its
directors and officers to the fullest extent permitted by Louisiana law.
The Company has also entered into indemnification agreements with its
directors and certain of its officers.
Louisiana Fair Price and Control Share Acquisition Statutes
As a Louisiana corporation, the Company is subject to the provisions of the
LBCL which contain "fair price" and "control share acquisition" provisions. Each
of these provisions imposes significant restrictions on the ability of an
acquiror of a large block of voting stock of a Louisiana corporation to exercise
control over the corporation.
The "fair price" provisions are set forth in Sections 132-134 of the LBCL
and are designed to restrict the ability of a Louisiana corporation to enter
into mergers or other extraordinary corporate transactions with certain
stockholders. These provisions require that certain business combinations
between a Louisiana corporation and "interested stockholders" must be approved
by (i) the corporation's Board of Directors, (ii) the affirmative vote of at
least 80% of the voting stock of the corporation, and (iii) the affirmative vote
of two-thirds of the voting stock of the corporation (excluding stock held by
the interested stockholders), unless the business combination satisfies certain
"fair price" tests regarding the payments to be made to stockholders and meets
certain other procedural requirements. An "interested stockholder" is defined as
any person (other than the corporation, any subsidiary of the corporation or any
employee benefit plan of the corporation or any subsidiary) that is the
beneficial owner of 10% or more of the voting stock of the corporation. In
general, the "fair price" tests measure the value stockholders receive for their
stock from an interested stockholder in transactions within a two year period.
The "control share acquisition" provisions of the LBCL are set forth in
Sections 135-140.2. In general, these provisions provide that persons who, after
May 4, 1987, acquire stock that would normally entitle them to exercise 20% or
more of the voting power of the corporation will not be able to vote the shares
acquired by them in excess of 20% of such voting power unless their ability to
vote is reinstated by the stockholders of the corporation at a meeting held
after the acquiring person requests such a vote. A corporation is required to
call such a meeting only if the person proposing to make a control share
acquisition (an "acquiring stockholder") has demonstrated a financial ability to
make a successful acquisition and such proposed acquisition is lawful. At such a
meeting, the voting rights of the acquiring stockholder will be reinstated for
shares held by the acquiring stockholder in excess of 20% of the Company's
voting power if approved by the affirmative vote of (i) a majority of all shares
of the Company then entitled to vote and (ii) a majority of all shares of the
Company then entitled to vote (excluding shares beneficially owned by the
acquiring stockholder, its officers and its directors who are also its
employees). If the voting rights of the acquiring stockholder are reinstated,
such stockholder can acquire additional voting shares within certain threshold
levels, without obtaining additional stockholder approval. However, if the
acquiring stockholder acquires additional shares in an
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acquisition that places such stockholder above the threshold ownership levels of
one-third and one-half of all voting shares, the additional shares acquired in
such an acquisition in excess of such ownership levels will not have voting
rights unless reinstated by the stockholders pursuant to the voting procedures
described above. A corporation must call a stockholders' meeting within 50 days
of the date that both the corporation and the proposed acquiring stockholder
file definitive proxy materials with the Commission.
Louisiana Insurance Code
UCLIC is a Louisiana chartered life insurance company. Section 731 of the
Louisiana Insurance Code (La.R.S. 22:731) provides that a Louisiana insurer may
merge or consolidate with or acquire control of another insurer, or a person may
acquire control of a Louisiana insurance company only if the plan of merger or
consolidation or acquisition of control is submitted to or receives advance
approval from the Louisiana Commissioner of Insurance after a public hearing
thereon. Section 731 provides that the Louisiana Commissioner of Insurance may
disapprove any such merger, consolidation or other acquisition of control for
any of the following reasons: (i) the effect thereof would be substantially to
lessen competition in insurance in Louisiana or tend to create a monopoly
therein; (ii) the financial condition of any acquiring party is such as might
jeopardize the financial stability of the insurer, or prejudice the interests of
its policyholders or the interests of any remaining security holders who are
unaffiliated with such acquiring party; (iii) the terms of the offer, request,
invitation, agreement or acquisition are unfair and unreasonable to the security
holders of the insurer; (iv) the plans or proposals which the acquiring party
has to liquidate the insurer, sell its assets or consolidate or merge it with
any person, or to make any other material change in its business or corporate
structure or management are unfair and unreasonable to policyholders of the
insurer and not in the public interest; or (v) the competence, experience and
integrity of those persons who would control the operation of the insurer are
such that it would not be in the interest of policyholders of the insurer and of
the public to permit the merger, consolidation or other acquisition of control.
Louisiana's Insurance Holding Company System Regulatory Law, constituting
Part XXI-A of the Louisiana Insurance Code (La.R.S. 22:1001-1015), requires the
filing of periodic registration statements by the Company with the Louisiana
Commissioner of Insurance and regulates transactions among members of an
insurance holding company system such as that of the Company. Any change of
control (10% or more of voting securities is presumed to constitute control for
purposes of this legislation) requires notification to hearing before and
approval of the Louisiana Commissioner of Insurance.
RIGHTS PLAN
On July 27, 1994, the Board of Directors of the Company redeemed the rights
issued under the rights plan adopted in February 1989, adopted the Rights Plan,
declared a dividend of one preferred stock purchase right (a "Right") for each
outstanding share of Common Stock on August 6, 1994, and authorized the issuance
of one Right with respect to each share of Common Stock issued after August 6,
1994, and before the earliest of the Distribution Date, the Redemption Date and
the Final Expiration Date (as such terms are hereinafter defined). The Rights
have anti-takeover effects. The Rights will cause substantial dilution to a
person or group that attempts to acquire the Company on terms not approved by
the Board of Directors, except pursuant to an offer conditioned on a substantial
number of Rights being acquired.
Each Right entitles the registered holder upon exercise on and after the
Distribution Date to purchase from the Company one one-hundredth of a share of
Series A Junior Participating Preferred Stock, par value $2.00 per share (the
"Preferred Shares"), of the Company at a price of $240.00 per one one-hundredth
of a Preferred Share (the "Purchase Price"), subject to adjustment. The
description and terms of the Rights, and the Preferred Shares into which such
Rights are exercisable, are set forth in the Rights Plan.
The "Distribution Date" occurs on the earliest of the close of business on
(i) the tenth day following a public announcement that a person or group of
affiliated or associated persons (an "Acquiring Person") has acquired beneficial
ownership of 20% or more of the outstanding shares of Common Stock, (ii) the
tenth day (or such later date as may be determined by action of the Board of
Directors of the Company prior to such time as any person becomes an Acquiring
Person) following the commencement of, or announcement of an
54
<PAGE> 56
intention to make, a tender offer or exchange offer, the consummation of which
would result in the beneficial ownership by a person or group of 25% or more of
the outstanding shares of Common Stock, or (iii) 10 days after the Board of
Directors shall declare any person to be an "Adverse Person," upon a
determination that such person, alone or together with its affiliates and
associates, has become the beneficial owner of 10% or more of the outstanding
shares of Common Stock and a determination by at least a majority of the Board
of Directors who are not officers of the Company, after reasonable inquiry and
investigation, including consultation with such persons as such directors shall
deem appropriate, that (a) such beneficial ownership by such person is intended
to cause, is reasonably likely to cause or will cause the Company to repurchase
the shares of Common Stock beneficially owned by such person or to cause
pressure on the Company to take action or enter into a transaction or series of
transactions intended to provide such person with short-term financial gain
under circumstances where the Board of Directors determines that the best
long-term interests of the Company and its stockholders would not be served by
taking such action or entering into such transactions or series of transactions
at that time or (b) such beneficial ownership is causing or is reasonably likely
to cause a material adverse impact (including, but not limited to, impairment of
relationships with customers or impairment of the Company's ability to maintain
its competitive position) on the business or prospects of the Company. However,
the Board of Directors may not declare a person to be an Adverse Person if,
prior to the time that the person acquired 10% or more of the shares of Common
Stock then outstanding, such person provided to the Board of Directors in
writing a statement of the person's purpose and intentions in connection with
the proposed acquisition of Common Stock, together with any other information
reasonably requested of the person by the Board of Directors, and the Board of
Directors, based on such statement and reasonable inquiry and investigation as
it deems appropriate, determines to notify and notifies such person in writing
that it will not declare the person to be an Adverse Person; provided, however,
that the Board of Directors may expressly condition in any manner a
determination not to declare a person an Adverse Person on such conditions as
the Board of Directors may select, including without limitation, such person not
acquiring more than a specified amount of stock and/or such person not taking
actions inconsistent with the purposes and intentions disclosed by such person
in the statement provided to the Board of Directors. In the event that the Board
of Directors should at any time determine, upon reasonable inquiry and
investigation, that such person has not met or complied with any conditions
specified by the Board of Directors, the Board of Directors may at any time
thereafter declare the person to be an Adverse Person. Until the Distribution
Date, the Rights will be transferred with and only with shares of Common Stock.
The Rights will expire on July 31, 2004 (the "Final Expiration Date"), unless
the Rights are earlier redeemed or exchanged by the Company.
The Purchase Price payable, and the number of Preferred Shares or other
securities of property issuable, on exercise of the Rights are subject to
adjustment from time to time to prevent dilution in the event of a stock
dividend on the Preferred Shares or other events described in the Rights Plan.
Preferred Shares purchasable upon exercise of the Rights will not be
redeemable. Each Preferred Share will be entitled to a minimum preferential
quarterly dividend payment of $1.00 per share but will be entitled to an
aggregate dividend of 100 times the dividend declared per share of Common Stock.
In the event of liquidation, the holders of the Preferred Shares will be
entitled to a minimum preferential liquidation payment of $100.00 per share but
will be entitled to an aggregate payment of 100 times the payment made per share
of Common Stock. Each Preferred Share will have 100 votes, voting together with
the Common Stock, Finally, in the event of merger, consolidation or other
transaction in which shares of Common Stock are exchanged, each Preferred Share
will be entitled to receive 100 times the amount received per share of Common
Stock. The Rights are protected by customary antidilution provisions.
Because of the nature of the Preferred Shares' dividend, liquidation and
voting rights, the value of the one one-hundredth interest in a Preferred Share
purchasable upon exercise of each Right should approximate the value of one
share of Common Stock.
The Rights Plan contains a "flip-over" feature allowing the exercise of the
Rights so that the holder thereof (except those Rights held by the Acquiring
Person) will receive shares of Common Stock of the Acquiring Person at half
price, causing substantial dilution to the Acquiring Person. In general, this
"flip-over" feature provides that in the event that the Company is acquired by
an Acquiring Person in a merger or other business combination transaction or 50%
or more of its consolidated assets or earning power are sold to
55
<PAGE> 57
an Acquiring Person, proper provision will be made so that each holder of a
Right, other than Rights that are or were beneficially owned by the Acquiring
Person after the date upon which the Acquiring Person became such (which will
thereafter be void), will thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, that number of shares of
common stock of the Acquiring Person which at the time of such transaction will
have a market value of two times the Purchase Price.
The Rights Plan also contains a "flip-in" feature allowing holders of
Rights (except those held by an Acquiring Person) to purchase Common Stock of
the Company at half price, causing substantial dilution to the Acquiring Person.
In general, this "flip-in" feature provides that in the event that (i) any
person becomes the beneficial owner of 25% or more of the outstanding Common
Stock (unless such person first acquires 25% or more of the outstanding Common
Stock by a purchase pursuant to a tender offer for all of the Common Stock which
the independent directors determine to be fair to and otherwise in the best
interests of the Company and its stockholders, employees, customers and
communities in which the Company does business), (ii) any person is declared by
the Board of Directors to be an Adverse Person, (iii) an Acquiring Person
engages in one or more "self-dealing" transactions set forth in the Rights Plan,
or (iv) during such time as there is an Acquiring Person, there shall be a
reclassification of securities or a recapitalization or reorganization of the
Company or other transaction or series of transactions involving the Company
which has the effect of increasing by more than 1% the proportionate share of
the outstanding shares of any class of equity securities of the Company or any
of its subsidiaries beneficially owned by the Acquiring Person, proper provision
shall be made so that each holder of a Right, other than Rights that are or were
beneficially owned by the Acquiring Person after the date upon which the
Acquiring Person became such (which will thereafter be void), will thereafter
have the right to receive upon exercise that number of shares of Common stock
(or, in the event that there are insufficient authorized shares of Common Stock
substitute consideration such as cash, property, or other securities of the
Company) having a market value of two times the Purchase Price.
At any time after the acquisition by an Acquiring Person of beneficial
ownership of 20% or more of the outstanding Common Stock and prior to the
acquisition by such person of 25% or more of the outstanding Common Stock, the
Board of Directors of the Company may exchange the Rights (other than Rights
owned by such person which have become void), in whole or in part, at an
exchange ratio of one share of Common Stock, or one one-hundredth of a Preferred
Share (or of a share of a class or series of the Company's preferred stock
having equivalent rights, preferences and privileges), per Right (subject to
adjustment).
At any time prior to the tenth day following a public announcement that an
Acquiring Person has acquired beneficial ownership of 20% or more of the
outstanding Common Stock, the Board of Directors of the Company may redeem the
Rights in whole, but not in part, at a price of $.001 per Right (the "Redemption
Price"). Immediately upon any redemption of the Rights, the right to exercise
the Rights will terminate and the only right of the holder of the Rights will be
to receive the Redemption Price. The date on which the redemption of the Rights
occurs pursuant to the foregoing provisions is referred to herein as the
"Redemption Date."
The terms of the Rights may be amended by the Board of Directors of the
Company without the consent of the holders of the Rights, including an amendment
to lower certain thresholds described above to not less than the greater of (i)
any percentage greater than the largest percentage of the outstanding shares of
the Common Stock then known to the Company to be beneficially owned by any
Acquiring Person and (ii) 10%, except that from and after such time as any
person becomes an Acquiring Person no such amendment may adversely effect the
interests of the holders of the Rights.
Until a Right is exercised, the holder of a Right will not, by reason of
being such a holder, have rights as a stockholder of the Company, including,
without limitation, the right to vote or to receive dividends.
56
<PAGE> 58
PLAN OF DISTRIBUTION
The Company may offer and sell the Offered Securities in one or more of the
following ways: (i) through underwriters or dealers; (ii) through agents; or
(iii) directly by the Company to one or more purchasers. The Prospectus
Supplement with respect to a particular offering of a series of Offered
Securities will set forth the terms of the offering of such Offered Securities,
including the name or names of any underwriters or agents with whom UCFC has
entered into arrangements with respect to the sale of such Offered Securities,
the public offering or purchase price of such Offered Securities and the
proceeds to the Company from such sales, and any underwriting discounts, agency
fees or commissions and other items constituting underwriters' compensation, the
initial public offering price, any discounts or concessions to be allowed or
reallowed or paid to dealers and any securities exchange, if any, on which such
Offered Securities may be listed. Dealer trading may take place in certain of
the Offered Securities, including Offered Securities not listed on any
securities exchange.
If underwriters are used in the offer and sale of Offered Securities, the
Offered Securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The Offered Securities may be offered to the
public either through underwriting syndicates represented by managing
underwriters, or by underwriters without a syndicate, all of which underwriters
in either case will be designated in the applicable Prospectus Supplement.
Unless otherwise set forth in the applicable Prospectus Supplement, under the
terms of the underwriting agreement, the obligations of the underwriters to
purchase Offered Securities will be subject to certain conditions precedent and
the underwriters will be obligated to purchase all the Offered Securities if any
are purchased. Any initial public offering price and any discounts or
concessions allowed or reallowed or paid to dealers may be changed from time to
time.
Offered Securities may be offered and sold directly by the Company or
through agents designated by the Company from time to time. Any agent involved
in the offer or sale of the Offered Securities with respect to which this
Prospectus is delivered will be named in, and any commissions payable by the
Company to such agent will be set forth in or calculable from, the applicable
Prospectus Supplement. Unless otherwise indicated in the Prospectus Supplement,
any such agent will be acting on a best-efforts basis for the period of its
appointment.
The Offered Securities will be new issues of securities with no established
trading market. Any underwriters to whom Offered Securities are sold by the
Company for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. No assurance can be
given as to the liquidity of the trading market for any Offered Securities.
Any underwriter, dealer or agent participating in the distribution of the
Offered Securities may be deemed to be an underwriter, as that term is defined
in the Securities Act, of the Offered Securities so offered and sold, and any
discounts or commissions received by it from UCFC and any profit realized by it
on the sale or resale of the Offered Securities may be deemed to be underwriting
discounts and commissions under the Securities Act.
Under agreements entered into with the Company, underwriters, dealers and
agents may be entitled to indemnification by the Company against certain civil
liabilities, including liabilities under the Securities Act, or to contribution
with respect to payments which the underwriters or agents may be required to
make in respect thereof.
Underwriters, dealers and agents also may be customers of, engage in
transactions with, or perform other services for the Company in the ordinary
course of business.
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<PAGE> 59
LEGAL OPINIONS
The legality of the Debt Securities will be passed upon for the Company by
Stroock & Stroock & Lavan, New York, New York. The legality of the Common Stock
and Preferred Stock will be passed upon for the Company by Kantrow, Spaht,
Weaver & Blitzer (A Professional Law Corporation), Baton Rouge, Louisiana.
Certain legal matters in connection with any offering of Securities involving
any underwriters or dealers will be passed upon for such underwriters or dealers
by Simpson Thacher & Bartlett (a partnership which includes professional
corporations), New York, New York. As to matters governed by the laws of the
State of Louisiana, Stroock & Stroock & Lavan and Simpson Thacher & Bartlett
will rely upon Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation). As of June 15, 1995, individual stockholders of the firm of
Kantrow, Spaht, Weaver & Blitzer (A Professional Law Corporation) owned,
directly or indirectly, approximately 25,000 shares of the Company's Common
Stock.
EXPERTS
The consolidated financial statements and the related financial statement
schedules incorporated in this Prospectus by reference from UCFC's Annual Report
on Form 10-K for the year ended December 31, 1994, as amended by Amendment No. 1
on Form 10-K/A, have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference,
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
With respect to the unaudited interim financial information for the periods
ended March 31, 1995 and 1994, which is incorporated herein by reference,
Deloitte & Touche LLP have applied limited procedures in accordance with
professional standards for a review of such information. However, as stated in
their reports included in the Company's Quarterly Report on From 10-Q for the
quarter ended March 31, 1995 and incorporated by reference herein, they did not
audit and they do not express an opinion on that interim financial information.
Accordingly, the degree of reliance on their reports on such information should
be restricted in light of the limited nature of the review procedures applied.
Deloitte & Touche LLP are not subject to the liability provisions of Section 11
of the Securities Act for their reports on the unaudited interim financial
information because those reports are not "reports" or a "part" of the
registration statement prepared or certified by an accountant within the meaning
of Sections 7 and 11 of the Securities Act.
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<PAGE> 60
PART II. INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The registration fee and the estimated expenses, other than underwriting or
broker-dealer fees, discounts and commissions, in connection with the offering
are as follows:
<TABLE>
<S> <C>
Registration Fee -- Securities and Exchange Commission.......... $ 68,965.52
Printing and Engraving Expenses................................. 175,000.00
Legal Fees and Expenses......................................... 350,000.00
Accounting Fees and Expenses.................................... 35,000.00
Blue Sky Fees and Expenses...................................... 45,000.00
Indenture Trustees Expenses..................................... 7,000.00
Rating Agency Fees and Expenses................................. 100,000.00
Transfer Agent Fees............................................. 10,000.00
Listing Fees.................................................... *
Miscellaneous................................................... 150,000.00
-----------
Total................................................. $940,965.52
===========
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 83 of the Louisiana Business Corporation Law (the "LBCL") provides
that a corporation may indemnify any person who was or is a party or is
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative, or investigative (other than an action by or in the
right of the corporation), by reason of the fact that he is or was a director,
officer, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, employee, or agent of another
business, foreign or nonprofit corporation, partnership, joint venture, or other
enterprise. The indemnity may include expenses, including attorney fees,
judgments, fines, and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit, or proceeding if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed
to, the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his conduct was
unlawful. Section 83 further provides that a Louisiana corporation may indemnify
officers and directors in an action by or in the right of the corporation under
the same conditions except that no indemnification is permitted without judicial
approval if the director or officer shall have been adjudged to be liable for
willful or intentional misconduct in the performance of his duty to the
corporation. Where an officer or director is successful on the merits or
otherwise in any defense of any action referred to above or any claim therein,
the corporation must indemnify him against such expenses that such officer or
director actually incurred. Section 83 permits a corporation to pay expenses
incurred by the officer or director in defending an action, suit or proceeding
in advance of the final disposition thereof if approved by the board of
directors.
Pursuant to Section 83 of the LBCL, the Company has adopted provisions in
its Articles of Incorporation which require the Company to indemnify its
directors and officers to the fullest extent permitted by the LBCL.
The Articles of Incorporation, as amended, provide that no director or
officer of the Company shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director or
officer except for liability (i) for breach of the directors' or officers' duty
of loyalty to the Company or its stockholders, (ii) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 92(D) of the LBCL, or (iv) for any transaction from
which the director or officer derived an improper personal benefit. Section
92(D) of the LBCL specifies certain corporate transactions, such as certain
dividend declarations and dispositions of assets, as unlawful. The effect of
this provision of the Articles of Incorporation is to eliminate the rights of
the Company and its stockholders (through stockholders' derivative suits on
behalf of the Company) to recover monetary damages against a director or officer
for breach of fiduciary duty as a director or officer. This provision does not
limit or eliminate the rights of the Company or any stockholders to seek
non-monetary relief, such as an injunction or recession in the event of a breach
of a director's or officer's fiduciary duty.
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<PAGE> 61
ITEM 16. LIST OF EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- -------------------- ----------------------------------------------------------------------
<C> <S>
1.1(1) -- Form of Underwriting Agreement for Securities
4.1(2) -- Series A Junior Participating Preferred Stock Purchase Rights
4.2(3) -- Senior Indenture
4.3(3) -- Form of Senior Note (included in Exhibit 4.2)
4.4(4) -- Subordinated Indenture
4.5(4) -- Form of Subordinated Note (included in Exhibit 4.4)
4.6(5) -- First Supplemental Senior Indenture for 9.35% Senior Notes due
November 1, 1999
4.7(1) -- Form of Articles of Amendment for Preferred Stock
4.8(1) -- Specimen Preferred Stock Certificate
4.9(1) -- Articles of Amendment for PRIDES
4.10(6) -- Specimen Certificate of PRIDES
5.1(1) -- Opinion of Stroock & Stroock & Lavan regarding legality of
securities being registered
5.2(1) -- Opinion of Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation) regarding legality of securities being registered
12.1(7) -- Statement of Computation of Ratio of Earnings to Fixed Charges
12.2(8) -- Statement of Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
15.1(1) -- Letter of Deloitte & Touche LLP regarding unaudited financial
information
23.1(1) -- Consent of Stroock & Stroock & Lavan (included in Exhibit 5.1)
23.2(1) -- Consent of Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation) (included in Exhibit 5.2)
23.3(1) -- Consent of Deloitte & Touche LLP
24.1(1) -- Powers of Attorney (included in Part II of this Registration
Statement)
25.1(1) -- Statement of Eligibility of Senior Trustee on Form T-1
25.2(1) -- Statement of Eligibility of Subordinated Trustee on Form T-1
</TABLE>
- ---------------
(1) Filed herewith.
(2) Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed on August 5, 1994.
(3) Incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(4) Incorporated by reference to Exhibit 4.2 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(5) Incorporated by reference to Exhibit 4.3 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(6) Incorporated by reference to Exhibit 4.4 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(7) Incorporated by reference to Exhibit 12.1 to the Company's Current Report on
Form 8-K filed May 26, 1995.
(8) Incorporated by reference to Exhibit 12.2 to the Company's Current Report on
Form 8-K filed May 26, 1995.
II-2
<PAGE> 62
ITEM 17. UNDERTAKINGS.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if
the Registration Statement is on Form S-3 or Form S-8 and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
Section 13 or Section 15(d) of the Exchange Act that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act (and, where applicable, each filing of an employee benefit plan's
annual report pursuant to Section 15(d) of the Exchange Act) that is
incorporated by reference in the Registration Statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in Securities Act and will be governed by the final
adjudication of such issue.
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<PAGE> 63
The undersigned Registrant hereby undertakes that, (1) for purposes of
determining any liability under the Securities Act, the information omitted from
the form of prospectus filed as a part of this Registration Statement in
reliance upon Rule 430A and contained in a form of prospectus filed pursuant to
Rules 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be
a part of this Registration Statement at the time it was declared effective, and
(2) for the purpose of determining any liability under the Securities Act, each
post-effective amendment if any that contains a form of prospectus shall be
deemed to be a new registration statement relating to the Securities offered
thereon, and the offering of such securities at that time shall be deemed to be
the initial bona fide offering thereof.
II-4
<PAGE> 64
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Baton Rouge, State of Louisiana on June 16, 1995.
UNITED COMPANIES FINANCIAL CORPORATION
By: /s/ SHERRY E. ANDERSON
----------------------------------------
Sherry E. Anderson
Senior Vice President and Secretary
Known all men by these presents, that each person whose signature appears
below constitutes and appoints Sherry E. Anderson, Dale E. Redman and J. Terrell
Brown, acting singly, as his true and lawful attorney-in-fact and agent, with
full power of substitution, and for him and in his name, place and stead, in any
and all capacities, to sign any and all amendments or post-effective amendments
to this Registration Statement and any registration statement relating to any
offering made pursuant to this Registration Statement that is to be effective
upon filing pursuant to Rule 462(b) under the Securities Act, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing requisite or necessary to be done in and about the
premises, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents, or their substitutes may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ J. TERRELL BROWN Chairman of the Board and June 16, 1995
- --------------------------------------------- Chief Executive Officer
J. Terrell Brown (Principal Executive Officer)
/s/ JOHN D. DIENES President, Chief Operating June 16, 1995
- --------------------------------------------- Officer and Director
John D. Dienes
/s/ DALE E. REDMAN Executive Vice President, June 16, 1995
- --------------------------------------------- Chief Financial Officer and
Dale E. Redman Director
(Principal Financial Officer)
/s/ JESSE O. GRIFFIN Senior Vice President and June 16, 1995
- --------------------------------------------- Controller (Principal
Jesse O. Griffin Accounting Officer)
/s/ JAMES J. BAILEY, III Director June 16, 1995
- ---------------------------------------------
James J. Bailey, III
/s/ ROBERT H. BARROW Director June 16, 1995
- ---------------------------------------------
Robert H. Barrow
/s/ RICHARD A. CAMPBELL Director June 16, 1995
- ---------------------------------------------
Richard A. Campbell
</TABLE>
II-5
<PAGE> 65
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------------ ---------------
<C> <S> <C>
/s/ HARRIS J. CHUSTZ, JR. Director June 16, 1995
Harris J. Chustz, Jr.
/s/ ROY G. KADAIR, M.D. Director June 16, 1995
Roy G. Kadair, M.D.
Director June , 1995
Robert D. Kilpatrick
Director June , 1995
O. Miles Pollard, Jr.
/s/ WILLIAM H. WRIGHT, JR. Director June 16, 1995
William H. Wright, Jr.
</TABLE>
II-6
<PAGE> 66
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
NUMBER DESCRIPTION OF DOCUMENT NUMBER
- ---------- -------------------------------------------------------------------- -----------
<C> <S> <C>
1.1(1) -- Form of Underwriting Agreement for Securities
4.1(2) -- Series A Junior Participating Preferred Stock Purchase Rights
4.2(3) -- Senior Indenture
4.3(3) -- Form of Senior Note (included in Exhibit 4.2)
4.4(4) -- Subordinated Indenture
4.5(4) -- Form of Subordinated Note (included in Exhibit 4.4)
4.6(5) -- First Supplemental Senior Indenture for 9.35% Senior Notes due
November 1, 1999
4.7(1) -- Form of Articles of Amendment for Preferred Stock
4.8(1) -- Specimen Preferred Stock Certificate
4.9(1) -- Articles of Amendment for PRIDES
4.10(6) -- Specimen Certificate of PRIDES
5.1(1) -- Opinion of Stroock & Stroock & Lavan regarding legality of
securities being registered
5.2(1) -- Opinion of Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation) regarding legality of securities being registered
12.1(7) -- Statement of Computation of Ratio of Earnings to Fixed Charges
12.2(8) -- Statement of Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
15.1(1) -- Letter of Deloitte & Touche LLP regarding unaudited financial
information
23.1(1) -- Consent of Stroock & Stroock & Lavan (included in Exhibit 5.1)
23.2(1) -- Consent of Kantrow, Spaht, Weaver & Blitzer (A Professional Law
Corporation) (included in Exhibit 5.2)
23.3(1) -- Consent of Deloitte & Touche LLP
24.1(1) -- Powers of Attorney (included in Part II of this Registration
Statement)
25.1(1) -- Statement of Eligibility of Senior Trustee on Form T-1
25.2(1) -- Statement of Eligibility of Subordinated Trustee on Form T-1
</TABLE>
- ---------------
(1) Filed herewith.
(2) Incorporated by reference to Exhibit 1 to the Company's Registration
Statement on Form 8-A filed on August 5, 1994.
(3) Incorporated by reference to Exhibit 4.1 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(4) Incorporated by reference to Exhibit 4.2 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(5) Incorporated by reference to Exhibit 4.3 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(6) Incorporated by reference to Exhibit 4.4 to the Company's Current Report on
Form 8-K filed on June 16, 1995.
(7) Incorporated by reference to Exhibit 12.1 to the Company's Current Report of
Form 8-K filed May 26, 1995.
(8) Incorporated by reference to Exhibit 12.2 to the Company's Current Report of
Form 8-K filed May 26, 1995.
<PAGE> 1
EXHIBIT 1.1
UNITED COMPANIES FINANCIAL CORPORATION
(a Louisiana corporation)
Securities
FORM OF UNDERWRITING AGREEMENT - BASIC PROVISIONS
_________, 1995
To: The Underwriters named
in the within mentioned
Terms Agreement
Dear Sirs:
United Companies Financial Corporation, a Louisiana
corporation (the "Company"), proposes to issue and sell from time to time its
senior debt securities, subordinated debt securities, convertible subordinated
debt securities (collectively, the "Debt Securities") and its preferred stock,
par value $2.00 per share (the "Preferred Stock"; together with the Debt
Securities, (the "Registered Securities") in one or more offerings on terms
determined at the time of sale. If specified in a Terms Agreement (as defined
below), the Company proposes to grant to the underwriters an option to purchase
up to that amount of Registered Securities specified in such Terms Agreement
(herein called the "Option Securities"). The Debt Securities will be issued
under either an indenture dated as of October 1, 1994, (the "Senior
Indenture"), between the Company and The First National Bank of Chicago, as
Trustee, or an indenture dated as of October 1, 1994, between the Company and
State Street Bank and Trust Company, as Trustee, (the "Subordinated Indenture",
and together with the Senior Indenture, the "Indentures"). Each issue of Debt
Securities may vary as to aggregate principal amount, maturity date or dates,
interest rate or rates and timing of payments thereof, redemption provisions,
conversion or exchange provisions and sinking fund requirements, if any,
covenants and any other variable terms which the Indentures contemplate may be
set forth in a supplemental indenture to the Senior Indenture or Subordinated
Indenture, as the case may be, (each, a "Supplemental Indenture"). The
Preferred Stock will be issued in one or more series, which series may vary as
to voting rights, dividends, optional and mandatory redemption provisions,
liquidation preference and conversion or exchange provisions, if any, and any
other terms, with all such terms for any particular series or issue of the
Preferred Stock being determined at the time of issue. The Registered
Securities (together with the Option Securities and any Debt Securities or
shares of common stock, par value $2.00 per share, of the Company (the "Common
Stock") issuable upon conversion or exchange of Registered
<PAGE> 2
2
Securities (the "Underlying Securities")) involved in any such offering are
hereinafter referred to as the "Securities."
Whenever the Company determines to make an offering of
Securities, it will enter into an agreement substantially in the form of
Exhibit A(I) or Exhibit A(II) hereto (the "Terms Agreement") providing for the
sale of such Securities (the "Offered Securities") to, and the purchase and
offering thereof by, the underwriter or underwriters named therein (the
"Underwriter" or "you", which terms shall include the underwriter or
underwriters named therein whether acting alone in the sale of such Offered
Securities or as members of an underwriting syndicate). The Terms Agreement
relating to each offering of Securities may take the form of an exchange of any
standard form of written telecommunication and shall specify the principal
amount of Debt Securities or number of shares of Preferred Stock to be issued
and their terms, the name or names of the Underwriters participating in such
offering (subject to substitution as provided in Section 10 hereof) and the
principal amount of Debt Securities or number of shares of Preferred Stock
which each severally agrees to purchase, the name or names of the Underwriters
acting as manager or co-managers in connection with such offerings, if any (the
"Representatives", which term shall include each Underwriter in the event that
there shall be no manager or co-manager), the price at which the Securities are
to be purchased by the Underwriters from the Company, the initial public
offering price, any delayed delivery arrangements, the time and place of
delivery and payment and such other applicable information as is indicated in
Exhibit A(I) or Exhibit A(II) hereto as agreed upon by the Company and the
Underwriters. This Agreement, the applicable Terms Agreement, the Indentures
and the applicable related Supplemental Indenture, if any, are hereinafter
referred to collectively as the "Operative Documents."
Each offering of the Securities will be governed by this
Agreement, as supplemented by the applicable Terms Agreement and this Agreement
and such Terms Agreement shall inure to the benefit of and be binding upon each
Underwriter participating in the offering of such Offered Securities.
The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") a registration statement on Form S-3
(File No. 33-______), including a prospectus, relating to the Securities and
the offering thereof from time to time in accordance with Rule 415 under the
Securities Act of 1933, as amended (the "1933 Act") and has filed such
pre-effective amendments thereto as may have been required to the date hereof.
Such registration statement, as so amended, has been declared effective by the
Commission, and the Indentures, if applicable, have been qualified under the
Trust Indenture Act of 1939, as amended (the "1939 Act"). Such registration
statement, as amended to the date such registration
<PAGE> 3
3
statement has been declared effective, including any documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act which were
filed under the Securities Exchange Act of 1934, as amended (the "1934 Act") on
or before the effective date of the registration statement, is hereinafter
called the "Registration Statement, " and such prospectus, as such prospectus
is supplemented on or after the date of the applicable Terms Agreement and
prior to the related Closing Time, by any prospectus supplement relating to the
Offered Securities, including by any such prospectus supplement in the form
first filed or to be filed on or after the date of the related Terms Agreement
pursuant to Rule 424(b) under the 1933 Act, including any documents
incorporated by reference therein pursuant to Item 12 of Form S-3 under the
1933 Act which were filed under the 1934 Act on or before the date of such
prospectus supplement (any such prospectus supplement, including such
incorporated documents, in the form first filed on or after the date of the
related Terms Agreement pursuant to Rule 424(b) is hereinafter called the
"Prospectus Supplement"), is hereinafter called the "Prospectus". All
references in this Agreement to financial statements and schedules and other
information which is "contained," "included" or "stated" in the Registration
Statement or the Prospectus (and all other references of like import) shall be
deemed to mean and include all such financial statements and schedules and
other information which is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be; and all
references in this Agreement to amendments or supplements, if any, to the
Registration Statement, the Prospectus or a Prospectus Supplement (and all
other references of like import) shall be deemed to mean and include the filing
of any document under the 1934 Act after the effective date of the Registration
Statement or the issue date of the Prospectus or Prospectus Supplement, as the
case may be, and prior to the related Closing Time which is deemed to be
incorporated therein pursuant to Item 12 of Form S-3 under the 1933 Act.
Capitalized terms used herein and not otherwise defined are
used herein as defined in the applicable Indenture, if any, (or, during the
period of time following the date of this Agreement and prior to the applicable
Closing Time (as defined in Section 2(b) hereof), as defined in the form of
applicable Indenture, if any, last filed by the Company with the Commission).
Section 1. Representations and Warranties. (a) The Company
represents and warrants at and as of the date hereof, as of the date of the
applicable Terms Agreement and as of the Closing Time (as hereinafter defined)
(in each case, the "Representation Date") as follows:
(i) The Company meets the requirements for use of Form S-3
under the 1933 Act. The Registration Statement, at the time it became
effective, and the prospectus contained
<PAGE> 4
4
therein, and any amendments thereof and supplements thereto filed
prior to the related Closing Time, conformed in all material respects
to the requirements of the 1933 Act and the rules and regulations of
the Commission thereunder; on the date of the related Terms Agreement
and as of the related Closing Time, the Registration Statement and the
Prospectus relating to the Offered Securities, and any amendments
thereof and supplements thereto, will conform in all material respects
to the requirements of the 1933 Act and the rules and regulations of
the Commission thereunder; the Registration Statement, at the time it
became effective (or, if an amendment to the Registration Statement or
an annual report on Form 10-K has been filed by the Company with the
Commission subsequent to the effectiveness of the Registration
Statement, then at the time such amendment became effective or as of
the most recent such filing, as the case may be), did not contain any
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading; the Prospectus, on the date of any filing
pursuant to Rule 424(b) and the Prospectus (as supplemented) as of the
related Closing Time, will not include any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they
are made, not misleading; provided, however, that the representations
and warranties in this subsection shall not apply to statements in or
omissions from the Registration Statement or Prospectus made in
reliance upon and in conformity with information furnished to the
Company in writing by any of you expressly for use in the Registration
Statement or Prospectus or to that part of the Registration Statement
which shall constitute the Statement of Eligibility and Qualification
under the 1939 Act (Form T-1) of either Trustee under the Indentures,
if any.
(ii) The documents incorporated by reference in the
Registration Statement and Prospectus, at the time they were or
hereafter are filed with the Commission, complied and will comply in
all material respects with the requirements of the 1934 Act, and the
rules and regulations of the Commission thereunder.
(iii) Deloitte & Touche LLP or such other nationally
recognized independent public accountants who are reporting upon the
audited financial statements and schedules included or incorporated by
reference in the Registration Statement are independent public
accountants as required by the 1933 Act.
(iv) This Agreement and the applicable Terms Agreement have
been duly authorized, executed and delivered by the Company.
<PAGE> 5
5
(v) (A) The consolidated financial statements and the
related notes of the Company included or incorporated by reference in
the (i) Registration Statement, including the prospectus contained
therein, at the time the Registration Statement became effective and
(ii) the Prospectus relating to the Offered Securities as of the issue
date of the related Prospectus Supplement and the Prospectus (as
supplemented) as of the Closing Time for the related Offered
Securities, present or will present, as the case may be, fairly, in
all material respects, the consolidated financial position of the
Company and its consolidated subsidiaries, considered as one
enterprise, as of the respective dates indicated and the consolidated
results of operations and cash flows and stockholders' equity and the
other information purported to be shown therein of the Company and its
consolidated subsidiaries, considered as one enterprise, for the
respective periods specified; (B) such financial statements and
related notes have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the
periods involved (unless otherwise disclosed in a note); and (C) the
financial statement schedules incorporated by reference in the
Registration Statement present fairly, in all material respects, the
information required to be stated therein.
(vi) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the State
of Louisiana, has corporate power and authority to own its property
and to conduct its business as described in the Prospectus and is duly
qualified to transact business and is in good standing in each
jurisdiction in which the conduct of its business or its ownership or
leasing of property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing are not
reasonably likely to, individually or in the aggregate, have a
material adverse effect on the condition (financial or otherwise),
properties, assets, business or results of operations of the Company
and its subsidiaries, considered as one enterprise.
(vii) Each subsidiary of the Company has been duly
incorporated, and other than Foster Mortgage Corporation ("FMC"), is
validly existing as a corporation in good standing under the law of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such
qualification, except to the extent that the failure to be so
qualified or be in good standing are not reasonably likely to,
individually or in the aggregate, have a material adverse effect on
the condition (financial or
<PAGE> 6
6
otherwise), properties, assets, business or results of operations of
the Company and its subsidiaries, considered as one enterprise.
(viii) Except as otherwise disclosed in the Prospectus and
other than the senior preferred stock of FMC, all of the issued and
outstanding capital stock of each subsidiary of the Company has been
duly authorized, is validly issued, fully paid and non-assessable and
is owned by the Company, directly or through one or more subsidiaries
of the Company, free and clear of any lien, mortgage, pledge,
encumbrance, claim or equity.
(ix) The Company has all of the requisite corporate power
and authority to execute, issue and deliver the Securities and to
incur and perform its obligations provided for therein; as of the date
of applicable Terms Agreement, the Debt Securities, if any, will have
been duly authorized by the Company and, when executed, issued and
authenticated in the manner provided for in the applicable Indenture
and related Supplemental Indenture, if any, and delivered as provided
for in this Agreement and the applicable Terms Agreement, will have
been duly executed, issued and delivered by the Company and will
constitute legal, valid and binding obligations of the Company
entitled to the benefits of the applicable Indenture and enforceable
against the Company in accordance with their terms, except as
enforcement thereof may be limited by bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium and other similar
laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or
at law) and an implied covenant of good faith and fair dealing; as of
the date of the applicable Terms Agreement, if any Securities to be
issued are convertible or exchangeable, the Underlying Securities
issuable upon conversion or exchange will be duly and validly
authorized, will have been duly reserved for issuance upon conversion
or exchange of the Securities, and when issued upon the conversion or
exchange of the Securities, will be duly and validly issued and, in
the case of Underlying Securities which are Common Stock, fully paid
and non-assessable; and the Securities conform in all material
respects to the description thereof contained in the Prospectus (as
supplemented).
(x) The Company has all of the requisite corporate power
and authority to execute and deliver the Indentures, if any, and to
perform its obligations provided for therein; as of the date of the
applicable Terms Agreement and as of the Closing Time for the related
Offered Securities, the Company will have all requisite corporate
power and authority to execute and deliver the related Supplemental
Indenture and to perform its obligations provided for
<PAGE> 7
7
therein; the Indentures, if any, have been duly authorized by the
Company, will be substantially in the forms heretofore delivered to
you and, when executed and delivered by the Company and assuming due
execution and delivery by the Trustees, will constitute legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing; and the Indentures
conform in all material respects to the descriptions thereof contained
in the Prospectus (as supplemented) as of the date of the applicable
Terms Agreement, and as of the Closing Time for the related Offered
Securities, the related Supplemental Indenture, if any, will have been
duly authorized by the Company and will constitute the legal, valid
and binding obligations of the Company, enforceable against the
Company in accordance with its terms, except as enforcement thereof
may be limited by bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing.
(xi) All of the outstanding shares of capital stock of the
Company have been duly authorized and are validly issued, fully paid
and non-assessable.
(xii) Except as disclosed in the Prospectus (as
supplemented), there are no holders of securities (debt or equity) of
the Company, or holders of rights (including preemptive rights),
warrants or options to obtain securities of the Company, who have the
right to request the Company to register securities held by them under
the 1933 Act.
(xiii) Since the respective dates as of which information is
given in the Registration Statement and the Prospectus, except as
otherwise stated therein or contemplated thereby or in any amendment
thereof or supplement thereto, there has not been (A) any material
adverse change in the condition (financial or otherwise), properties,
assets, business or results of operations of the Company and its
subsidiaries, considered as one enterprise, whether or not arising in
the ordinary course of business, (B) any transaction entered into by
the Company or any of its subsidiaries, other than in the ordinary
course of business, that is reasonably likely to have a material
adverse effect on the condition (financial or otherwise), properties,
assets, business or results of operations of the Company and its
subsidiaries,
<PAGE> 8
8
considered as one enterprise, or (C) any dividend or distribution of
any kind declared, paid or made by the Company on its capital stock,
other than regular quarterly dividends.
(xiv) Neither the Company nor any of its subsidiaries is (A)
in violation of its or any of their articles or certificates of
incorporation or by-laws or, other than FMC, in default (nor has an
event occurred that with notice or passage of time or both would
constitute such a default) in the performance or observance of any
obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit
agreement, note, lease or other agreement or instrument to which the
Company or its subsidiaries is subject or by which any of them or any
of their properties may be bound or affected, (B) other than FMC, in
violation of any existing applicable law, ordinance, regulation,
judgment, order or decree of any government, governmental
instrumentality, arbitrator or court, domestic or foreign, having
jurisdiction over the Company or any of its subsidiaries or any of
their properties or (C) other than FMC, in each case to the knowledge
of the Company, in violation of or has violated any permit,
certificate, license, order or other approval or authorization
required in connection with the operation of its business that, with
respect to clause (A), (B) or (C) of this sentence, are not reasonably
likely to (individually or in the aggregate) (1) adversely affect the
legality, validity or enforceability of this Agreement, the applicable
Terms Agreement, or the applicable Indenture and related Supplemental
Indenture, if any, (2) have a material adverse effect on the condition
(financial or otherwise), properties, assets, business or results of
operations of the Company and its subsidiaries, considered as one
enterprise, or (3) impair the ability of the Company to fully perform
on a timely basis any obligations that it has under this Agreement,
the applicable Terms Agreement, the applicable Indenture or the
related Supplemental Indenture, if any.
(xv) The issuance, sale and delivery of the Offered
Securities, the execution, delivery and performance of the other
Operative Documents, the compliance by the Company with the terms
therein and the consummation by the Company of the transactions
contemplated thereby and in the Registration Statement do not and will
not result in a violation of any of the terms or provisions of the
articles or certificates of incorporation or by-laws of the Company or
any of its subsidiaries, and do not and will not conflict with, or
result in a breach or violation of any of the terms or provisions of,
or constitute a default under, (A) any indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or other agreement or
instrument to which the Company or any of its subsidiaries is a party
or
<PAGE> 9
9
by which any of them or any of their properties or assets is bound,
except for such conflicts, breaches, violations or defaults that are
not reasonably likely to have a material adverse effect on the
condition (financial or otherwise), properties, assets, business or
results of operations of the Company and its subsidiaries, considered
as one enterprise, or (B) any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any of its subsidiaries or any of their
properties.
(xvi) No authorization, approval, consent or order of, or
qualification with, any governmental body or agency is required to be
obtained or made by the Company for (A) the due authorization,
execution, delivery and performance by the Company of each of the
Operative Documents to which it is or will be a party or (B) the valid
authorization, issuance, sale and delivery of the Offered Securities,
except such as may be required by the securities or blue sky laws of
the various states in connection with the offer and sale of the
Securities.
(xvii) There is no action, suit, investigation or proceeding
before or by any government, governmental instrumentality or court,
domestic or foreign, now pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries
or any of their properties that (A) is required to be disclosed in the
Prospectus and is not so disclosed in the Prospectus (as
supplemented), (B) except as disclosed in the Prospectus (as
supplemented), is reasonably likely to result in any material adverse
change in the condition (financial or otherwise), properties, assets,
business or results of operations of the Company and its subsidiaries,
considered as one enterprise, (C) seeks to restrain, enjoin, prevent
the consummation of or otherwise challenge the issuance and sale of
the Securities or the execution and delivery of this Agreement, the
applicable Terms Agreement or the applicable Indenture or related
Supplemental Indenture, if any, or any of the transactions
contemplated hereby or thereby or (D) questions the legality or
validity of any such transaction or seeks to recover damages or obtain
other relief in connection with any such transaction, and, in each
case to the knowledge of the Company, there is no valid basis for any
such action, suit, investigation or proceeding except as otherwise
disclosed in the Prospectus (as supplemented).
(xviii) There are no statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not described or filed as required.
<PAGE> 10
10
(xix) Each of the Company and its subsidiaries other than FMC
has all necessary consents, authorizations, approvals, orders,
licenses, certificates and permits of and from, and has made all
declarations and filings with, all federal, state, local and other
governmental authorities, all self-regulatory organizations and all
courts and other tribunals, to own, lease, license and use its
properties and assets and to conduct its business in the manner
described in the Prospectus (as supplemented), except to the extent
that the failure to so obtain or file is not reasonably likely to have
a material adverse effect on the Company and its subsidiaries,
considered as one enterprise, and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the
revocation or modification of any such consent, authorization,
approval, order, license, certificate or permit which singly or in the
aggregate, if the subject of any unfavorable decision, ruling or
finding, are reasonably likely to result in any material adverse
change in the condition (financial or otherwise), properties, assets,
business or results of operations of the Company and its subsidiaries,
considered as one enterprise.
(xx) Each of the Company and its subsidiaries owns or
possesses, or can acquire on reasonable terms, adequate patents,
patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other proprietary or confidential information,
systems or procedures, whether patented or unpatented), trademarks,
service marks and trade names (collectively, "intellectual property")
presently employed by them in connection with the business now
operated by them, except where the failure to own or possess or have
the ability to acquire any such intellectual property is not
reasonably likely to have a material adverse effect on the condition
(financial or otherwise), properties, assets, business or results of
operations of the Company and its subsidiaries, considered as one
enterprise, and neither the Company nor any of its subsidiaries has
received any notice of infringement of or conflict with asserted
rights of others with respect to any of the foregoing that,
individually or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, is reasonably likely to result in any
material adverse change in the condition (financial or otherwise),
properties, assets, business or results of operations of the Company
and its subsidiaries, considered as one enterprise.
(xxi) The Company has not taken and will not take, directly
or indirectly, any action designed to or that might be reasonably
expected to, cause or result in stabilization or manipulation of the
price of the Securities.
<PAGE> 11
11
(xxii) The Company is not an investment company within the
meaning of the Investment Company Act of 1940, as amended.
(b) Any certificate signed by any officer of either the
Company or any of its subsidiaries and delivered to you or to your counsel at
the Closing Time pursuant to this Agreement or the applicable Terms Agreement
or the transactions contemplated hereby or thereby shall be deemed a
representation and warranty by the Company or such subsidiary of the Company,
as the case may be, to each of you as to the matters covered thereby.
Section 2. Sale and Delivery to the Underwriters: Closing.
(a) Your several commitments to purchase Securities pursuant to any Terms
Agreement shall be deemed to have been made on the basis of the representations
and warranties herein contained, and shall be subject to the terms and
conditions herein set forth.
(b) Payment of the purchase price for, and delivery of, any
Securities to be purchased by you shall be made at the place set forth in the
applicable Terms Agreement or at such other place as shall be agreed upon by
the Company and you, on the third full business day (unless postponed pursuant
to Section 10) following the date of the applicable Terms Agreement or at such
other time not more than ten full business days thereafter as you and the
Company shall determine (such date and time of payment and delivery being
herein called the "Closing Time"). Payment shall be made to the Company by
wire transfer payable in same-day federal funds, less one day's interest at the
federal funds rate, to an account specified by the Company in the applicable
Terms Agreement or by certified or official bank check or checks in New York
Clearing House funds payable to the order of the Company, as specified in the
applicable Terms Agreement, against delivery of the Securities to the
Representatives for the respective accounts of the Underwriters of the
Securities to be purchased by them.
(c) The Debt Securities shall be in such denominations
($1,000 or an integral multiple thereof) and registered in such names as the
Representatives may request in writing at least two full business days prior to
the Closing Time. The Debt Securities, which may be in temporary form, and the
shares of Preferred Stock will be made available in New York City for
examination and packaging by the Representatives not later than 10:00 A.M., New
York City time, on the business day prior to the Closing Time.
If specified in a Terms Agreement, on the basis of the
representations, warranties and covenants herein contained, and subject to the
terms and conditions herein set forth, the Company grants an option to you to
purchase, severally and not jointly, up to that amount of the Option
Securities, as shall be specified in the Terms Agreement, from the Company at
the same price as you
<PAGE> 12
12
shall pay for the relevant Securities. Said option may be exercised only to
cover over-allotments in the sale of the Securities by you and may be exercised
in whole or in part at any time (not more than once) on or before the thirtieth
day after the date of the Terms Agreement upon written or telegraphic notice by
you to the Company setting forth the amount of the Option Securities as to
which you are exercising the option. The amount of Option Securities to be
purchased by each Underwriter shall be the same percentage of the total amount
of the Option Securities to be purchased by the several Underwriters as such
Underwriter is purchasing of the Securities, as adjusted by you in such manner
as you deem advisable to avoid fractional shares/units.
If authorized by the applicable Terms Agreement, the
Underwriters named therein may solicit offers to purchase Debt Securities from
the Company pursuant to delayed delivery contracts ("Delayed Delivery
Contracts") substantially in the form of Exhibit B hereto, with such changes
therein as the Company may approve. As compensation for arranging Delayed
Delivery Contracts, the Company will pay to the Representatives at Closing Time
a fee equal to that percentage of the principal amount of Debt Securities for
which Delayed Delivery Contracts are made at Closing Time as is specified in
the applicable Terms Agreement. Any Delayed Delivery Contracts are to be with
institutional investors of the types which will be set forth in the applicable
Prospectus Supplement. At Closing Time the Company will enter into Delayed
Delivery Contracts (for not less than the minimum principal amount of Debt
Securities per Delayed Delivery Contract specified in the applicable Terms
Agreement) with all purchasers proposed by you and previously approved by the
Company as provided below, but not for an aggregate principal amount of Debt
Securities in excess of that specified in the applicable Terms Agreement. You
will not have any responsibility for the validity or performance of Delayed
Delivery Contracts.
The Representatives will submit to the Company, at least three
business days prior to Closing Time, the names of any institutional investors
with which it is proposed that the Company will enter into Delayed Delivery
Contracts and the principal amount of Debt Securities to be purchased by each
of them and the Company will advise the Representatives, at least two business
days prior to Closing Time, of the names of the institutions with which the
making of Delayed Delivery Contracts is approved by the Company and the
principal amount of Debt Securities to be covered by each such Delayed Delivery
Contract.
The principal amount of Debt Securities agreed to be purchased
by the respective Underwriters pursuant to the applicable Terms Agreement shall
be reduced by the principal amount of Debt Securities covered by Delayed
Delivery Contracts, as to each Underwriter as set forth in a written notice
delivered by the Representatives to the Company; provided, however, that
<PAGE> 13
13
the total principal amount of Debt Securities to be purchased by all
Underwriters shall be the total amount of Debt Securities covered by the
applicable Terms Agreement, less the principal amount of Debt Securities
covered by Delayed Delivery Contracts.
Section 3. Certain Covenants of the Company. The Company
covenants with each of you as follows:
(a) Immediately following the execution of each Terms
Agreement, the Company will prepare a Prospectus Supplement setting
forth the principal amount of Debt Securities or the number of shares
of Preferred Stock covered thereby and their terms not otherwise
specified in the applicable Indenture, if any, the names of the
Underwriters and the principal amount of Debt Securities or the number
of shares of Preferred Stock which each of them severally has agreed
to purchase, the price at which the Offered Securities are to be
purchased by you from the Company, the initial public offering price,
the selling concession and reallowance, if any, any delayed delivery
arrangements, and such other information as the Representatives and
the Company deem appropriate in connection with the offering of the
Securities. The Company will promptly transmit copies of the
Prospectus Supplement to the Commission for filing pursuant to Rule
424 under the 1933 Act and will furnish to each of you as many copies
of the Prospectus and such Prospectus Supplement as the
Representatives shall reasonably request.
(b) The Company has furnished or will furnish to you, without
charge, as many signed and conformed copies of the Registration
Statement and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents
incorporated by reference in the Prospectus) and signed copies of all
consents and certificates of experts and, during the period mentioned
in paragraph (f) below, as many copies of the Prospectus and any
supplements and amendments thereto, in each case as soon as available,
as you may reasonably request.
(c) From the date of a Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Offered Securities covered by such Terms Agreement, the Company will
give you notice of its intention to file any amendment to the
Registration Statement or any amendment or supplement to the
Prospectus, whether pursuant to the 1934 Act, the 1933 Act or
otherwise, and will furnish you with copies of any such amendment or
supplement or other documents proposed to be filed a reasonable time
in advance of filing and will not file any such amendment or
supplement or use any such prospectus to which you or your counsel
reasonably shall object.
<PAGE> 14
14
(d) From the date of a Terms Agreement, and for so long as a
Prospectus is required to be delivered in connection with the sale of
Offered Securities covered by such Terms Agreement, the Company will
notify you immediately, and confirm the notice in writing, (i) of the
effectiveness of any amendment to the Registration Statement, (ii) of
the mailing or the delivery to the Commission for filing of any
supplement to the Prospectus or any document to be filed pursuant to
the 1934 Act which will be incorporated by reference into the
Registration Statement or Prospectus, (iii) of the receipt of any
comments from the Commission with respect to the Registration
Statement, the Prospectus or any Prospectus Supplement, (iv) of any
request by the Commission for any amendment to the Registration
Statement or any amendment or supplement to the Prospectus or for
additional information, and (v) of the issuance by the Commission of
any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose. The
Company will make every reasonable effort to prevent the issuance of
any stop order and, if any stop order is issued, to obtain the lifting
thereof at the earliest possible moment.
(e) Between the date of any Terms Agreement and termination
of any trading restrictions specified in the applicable Terms
Agreement, if any, or Closing Time, whichever is later, with respect
to (i) the Debt Securities covered thereby, the Company will not,
without your prior consent or as otherwise permitted by the Terms
Agreement, offer or sell, or enter into any agreement to sell, any
debt securities of the Company with a maturity of more than one year,
including additional Debt Securities, (ii) the Preferred Stock covered
thereby, the Company will not, without your prior consent or as
otherwise permitted by the Terms Agreement, offer or sell, or enter
into any agreement to sell, any shares of its preferred stock or any
securities convertible into or exchangeable or exercisable for or any
right to purchase or acquire preferred stock and (iii) the Underlying
Securities covered thereby, the Company will not, without your prior
consent or as otherwise permitted by the Terms Agreement, offer or
sell, or enter into any agreement to sell, any securities of the same
class as the Underlying Securities or any securities convertible into
or exercisable or exchangeable for or any right to purchase or acquire
Underlying Securities or securities of such class.
(f) The Company will comply to the best of its ability with
the 1933 Act, the 1934 Act and the 1939 Act and the regulations
thereunder so as to permit the completion of the distribution of the
Securities as contemplated in this Agreement, the applicable Terms
Agreement and in the Prospectus. If at any time when, in the opinion
of your counsel, the Prospectus is required by law to be delivered
<PAGE> 15
15
in connection with sales of the Offered Securities by you or by a
dealer, any event shall occur as a result of which it is necessary to
amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is
delivered to a purchaser, not misleading, or if it is necessary to
amend or supplement the Prospectus to comply with law, the Company
shall forthwith prepare and furnish, at the Company's expense, to each
of you and to the dealers (whose names and addresses you will furnish
to the Company) to which Offered Securities may have been sold by you
and to any other dealers upon request, either amendments or
supplements to the Prospectus so that the statements in the Prospectus
as so amended or supplemented will not, in the light of the
circumstances when the Prospectus is delivered to a purchaser, be
misleading or so that the Prospectus as so amended or supplemented
will comply with the law.
(g) The Company will endeavor to qualify the Securities for
offer and sale under the securities or blue sky laws of such
jurisdictions as you shall reasonably request and to maintain such
qualifications in effect for as long as may be required for the
distribution of the Securities; provided, however, that the Company
shall not be obligated to file any general consent to service of
process or to qualify as a foreign corporation or as a dealer in
securities in any jurisdiction in which it is not so qualified or to
subject itself to taxation in respect of doing business in any
jurisdiction in which it is not otherwise so subject. The Company
will file such statements and reports as may be required by the laws
of each jurisdiction in which the Securities have been qualified as
above provided.
(h) With respect to each sale of Offered Securities, the
Company will make generally available to its security holders as soon
as practicable but in any event not later than 90 days after the close
of the period covered thereby a consolidated earning statement for a
twelve-month period beginning after the effective date (as defined in
Rule 158(c) under the 1933 Act) of the Registration Statement relating
to such Securities, but not later than the first day of the Company's
fiscal quarter next following such effective date and that otherwise
satisfies the provisions of Section 11(a) of the 1933 Act and the
regulations thereunder.
(i) The Company will use the proceeds received from the sale
of the Offered Securities in the manner specified in the Prospectus
under the heading "Use of Proceeds."
(j) The Company, during the period when the Prospectus is
required to be delivered under the 1933 Act, will file
<PAGE> 16
16
promptly all documents required to be filed with the Commission
pursuant to Section 13 or 14 of the 1934 Act within the time periods
required under the 1934 Act.
(k) For a period of five years after the applicable Closing
Time, the Company will furnish to each of you copies of all annual
reports, quarterly reports and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as
may be designated by the Commission, and such other documents, reports
and information as shall be furnished by the Company to the holders of
the Securities or to security holders of its respective publicly
issued securities generally.
Section 4. Payment of Expenses. The Company will pay and
bear all costs and expenses incident to the performance of its obligations
under this Agreement and each related Terms Agreement, including (a) the
preparation, printing and filing of the Registration Statement (including
financial statements and schedules and exhibits), as originally filed and as
amended and the Prospectus and any amendments or supplements thereto, and the
cost of furnishing copies thereto to you, (b) the preparation, printing and
distribution of this Agreement (including each related Terms Agreement), the
Offered Securities, any related Indentures, a survey of state securities or
blue sky laws (the "Blue Sky Survey"), (c) the delivery of the Offered
Securities to you, (d) the fees and disbursements of the Company's counsel and
accountants, (e) the qualification of the Offered Securities under the
applicable securities laws in accordance with Section 3(g) and any filing for
review of the offering with the National Association of Securities Dealers,
Inc., if any, including filing fees and fees and disbursements of your counsel
in connection therewith and in connection with the Blue Sky Survey and any
legal investment survey, (f) any fees charged by rating agencies for rating the
Offered Securities, (g) the fees and expenses of any Trustees, including the
fees and disbursements of counsel for any Trustees, in connection with the
related Indentures and the Debt Securities, (h) any transfer agent's fees and
(i) the listing, if any, of the Securities on any securities exchange. Subject
to the provisions of the following paragraph, you agree to pay, whether or not
the transactions contemplated hereby are consummated or this Agreement is
terminated, all costs and expenses incident to the performance of your
obligations under this Agreement and the applicable Terms Agreement not payable
by the Company pursuant to the preceding sentence, including without limitation
the fees and disbursements of your counsel.
If this Agreement is terminated by you in accordance with the
provisions of Section 5 or 9(a)(i), the Company shall reimburse each of you up
to an aggregate amount to be set forth in the related Terms Agreement for all
of your out-of-pocket expenses, including the reasonable fees and disbursements
of your counsel, upon receipt of itemized statements therefor.
<PAGE> 17
17
Section 5. Conditions of Underwriters' Obligations. The
obligations of each of you to purchase and pay for the Offered Securities
pursuant to any related Terms Agreement are subject to the accuracy of the
representations and warranties of the Company contained herein (including those
contained in the applicable Terms Agreement) or in certificates of any officer
of the Company delivered pursuant to the provisions hereof, to the performance
by the Company of its covenants and other obligations hereunder and to the
following further conditions:
(a) At the applicable Closing Time, (i) no stop order
suspending the effectiveness of the Registration Statement shall have
been issued under the 1933 Act and no proceedings for that purpose
shall have been instituted and shall be pending or, to your knowledge
or the knowledge of the Company, shall be contemplated by the
Commission, and any request on the part of the Commission for
additional information shall have been complied with to the
satisfaction of your counsel.
(b) At the applicable Closing Time, each of you shall have
received a signed opinion of Stroock & Stroock & Lavan, or such other
outside counsel of recognized standing reasonably acceptable to the
Underwriters that may opine on matters of New York law and federal
securities law, counsel for the Company, dated as of the applicable
Closing Time, in form and substance satisfactory to your counsel, to
the effect that:
(i) The Indentures and the related Supplemental
Indenture(s), if any, described in the applicable Terms
Agreement are the legally valid and binding agreements of the
Company, enforceable against the Company in accordance with
their terms except as enforcement thereof may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and other similar laws relating to or affecting
creditors' rights generally, general equitable principles
(whether considered in a proceeding in equity or at law) and
an implied covenant of good faith and fair dealing;
(ii) The Debt Securities, if any, covered by the
applicable Terms Agreement are in the form contemplated by the
applicable Indenture and the related Supplemental
Indenture(s), and, when executed and authenticated in
accordance with the terms of the applicable Indenture and
delivered to and paid for by you in accordance with the terms
of this Agreement as supplemented by the applicable Terms
Agreement, will be legally valid and binding obligations of
the Company, enforceable against the Company in accordance
with their terms except as enforcement thereof may be limited
by bankruptcy, insolvency, fraudulent
<PAGE> 18
18
conveyance, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in
equity or at law) and an implied covenant of good faith and
fair dealing;
(iii) The Indentures, if any, have been duly
qualified under the 1939 Act;
(iv) The Company is not an investment company
within the meaning of the Investment Company Act of 1940, as
amended;
(v) The statements set forth in the Prospectus
under the caption "Description of Securities," insofar as they
constitute summaries of documents, are accurate in all
material respects and the Indentures, if any, and the Offered
Securities covered by the applicable Terms Agreement conform
in all material respects to the descriptions thereof in the
Prospectus;
(vi) The Registration Statement is effective under
the 1933 Act and, to the best of such counsel's knowledge, no
stop order suspending the effectiveness of the Registration
Statement has been issued under the 1933 Act and no
proceedings therefor have been initiated or threatened by the
Commission; and any required filing of the Prospectus pursuant
to Rule 424(b) under the 1933 Act has been made in accordance
with Rule 424(b) under the 1933 Act; and
(vii) The Registration Statement (excluding the
documents incorporated therein by reference) and the
Prospectus comply as to form in all material respects with the
requirements for registration statements on Form S-3 under the
1933 Act; it being understood, however, that such counsel
expresses no opinion with respect to the financial statements,
schedules and other financial and statistical data included or
incorporated in the Registration Statement or the Prospectus
or with respect to the Statement as to the Eligibility and
Qualification of the Trustee on Form T-1, if any. In passing
upon the compliance as to form of the Registration Statement
and the Prospectus, such counsel has assumed that the
statements made therein are correct and complete.
In addition, such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants for the Company, and the
Representatives, at which the contents of the Registration Statement
and the Prospectus and related matters were discussed and, although
<PAGE> 19
19
such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus
and have not been called on to make and have not made any independent
check or verification thereof, during the course of such participation
(relying as to materiality to a large extent upon the statements of
officers and other representatives of the Company), no facts came to
such counsel's attention that caused such counsel to believe that the
Registration Statement, at the time it became effective, or if an
amendment to the Registration Statement or an annual report on Form
10-K has been filed by the Company with the Commission subsequent to
the effectiveness of the Registration Statement, then at the time such
post-effective amendment became effective or as of the most recent
filing, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
(including the documents incorporated by reference therein but giving
effect to Rule 412 under the 1933 Act), as of the date of the most
recent Prospectus Supplement or the Prospectus (as supplemented) as of
the applicable Closing Time, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; it being understood that such counsel
expresses no belief with respect to the financial statements and notes
and schedules thereto and other financial, accounting, tax and
statistical data included in (or incorporated in) the Registration
Statement or the Prospectus or with respect to the Statement of
Eligibility and Qualification of the Trustee on Form T-1, if any.
In rendering such opinion, Stroock & Stroock & Lavan (or such
other counsel) (i) may rely as to factual matters upon certificates or
written statements from officers or other appropriate representatives
of the Company or upon certificates of public officials, (ii) may rely
(to the extent such counsel deems proper and specifies in their
opinion), as to matters involving the application of the laws of the
State of Louisiana, upon the opinion of Kantrow, Spaht, Weaver &
Blizter (A Professional Law Corporation) or such other outside counsel
of recognized standing reasonably acceptable to the Underwriters, that
may opine on matters of Louisiana law, and (iii) need not express any
opinion with regard to the laws of any jurisdiction other than the
federal law of the United States and the law of the State of New York.
Further, such opinion may contain assumptions, limitations, exceptions
and restrictions which are reasonably satisfactory to you and your
counsel.
<PAGE> 20
20
(c) At the applicable Closing Time, each of you shall have
received a signed opinion of Kantrow, Spaht, Weaver & Blizter (A
Professional Law Corporation), or such other outside counsel of
recognized standing reasonably acceptable to the Underwriters that may
opine on matters of Louisiana law, counsel for the Company, dated as
of the applicable Closing Time, in form and substance satisfactory to
your counsel, to the effect that:
(i) The Company has been duly incorporated and is
validly existing and in good standing under the laws of the
State of Louisiana, with corporate power and authority to own
its property and to conduct its business as described in the
Prospectus. The Company is duly qualified as a foreign
corporation in each of the respective jurisdictions set forth
on Exhibit A to such opinion and officers of the Company have
submitted to such counsel a certificate, a copy of which is
attached to such opinion as Exhibit B, stating that, in their
opinion, such jurisdictions are the only jurisdictions in
which the conduct of its business or its ownership or leasing
of property requires such qualification, except to the extent
that the failure to be so qualified is not reasonably likely
to have a material adverse effect on the Company and its
subsidiaries considered as one enterprise;
(ii) Each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus and is
duly qualified as a foreign corporation in each of the
respective jurisdictions set forth on Exhibit A to such
opinion and officers of such subsidiary have submitted to such
counsel a certificate, a copy of which is attached to such
opinion as Exhibit B, stating that, in their opinion, such
jurisdictions are the only jurisdictions in which the conduct
of its business or its ownership or leasing of property
requires such qualifications, except to the extent that the
failure to be so qualified is not reasonably likely to have a
material adverse effect on the Company and its subsidiaries
considered as one enterprise; all of the issued and
outstanding capital stock of each subsidiary (other than the
senior preferred stock of FMC) has been duly authorized and
validly issued, is fully paid and non-assessable and all of
the issued and outstanding capital stock of such subsidiaries
(other than the senior preferred stock of FMC), is owned of
record by the Company, directly or through subsidiaries, and
is free and clear of any pledge, lien, encumbrance, claim
<PAGE> 21
21
or equity; UCLC is a corporation in good standing under the
laws of the State of Louisiana; and UCLIC and United General
Title Insurance Company are each in compliance with the laws
of the State of Louisiana;
(iii) The Debt Securities, if any, described in the
applicable Terms Agreement have been duly authorized by the
Company;
(iv) The Company has the requisite corporate power
and authority to execute, deliver and perform its obligations
under the Indentures and the related Supplemental
Indenture(s), if any. The Indentures, if any, have been duly
authorized, executed and delivered by the Company;
(v) The Company has the requisite corporate power
and authority to issue and deliver the Offered Securities;
(vi) The Company has the requisite corporate power
and authority to execute, deliver and perform its obligations
under this Agreement and the applicable Terms Agreement. This
Agreement, the applicable Terms Agreement and the Delayed
Delivery Contracts, if any, have been duly authorized,
executed and delivered by the Company;
(vii) Neither (A) the execution and delivery by the
Company of each of the Operative Documents to be executed and
delivered by the Company at or prior to the applicable Closing
Time nor (B) the issuance and sale of the Offered Securities
by the Company pursuant to this Agreement, the applicable
Terms Agreement and the Indentures and the related
Supplemental Indentures, if any, will, as of the applicable
Closing Time, result in the violation or breach by the Company
of, or a default under, (1) its articles of incorporation or
by-laws, (2) any federal or Louisiana statute, rule or
regulation applicable to the Company or any of its
subsidiaries (except that no opinion is expressed with respect
to blue sky or state securities laws), (3) any agreement or
other instrument known to such counsel and listed as an
Exhibit to the Company's most recent Annual Report on Form
10-K for the Company's most recent fiscal year binding upon
the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, considered as one enterprise, or
(4) any court or administrative orders, writs, judgments or
decrees applicable to the Company and known to such counsel;
<PAGE> 22
22
(viii) To the best of such counsel's knowledge, no
consent, approval, authorization or order of, or filing with,
any federal or Louisiana court or governmental body or agency
is required to be obtained or made by the Company or any of
its subsidiaries for the execution and delivery by the Company
of each of the Operative Documents to be executed and
delivered by the Company at or prior to the Closing Time and
the consummation of the issuance and sale of the Offered
Securities by the Company pursuant to this Agreement, the
applicable Terms Agreement and the Indentures and the related
Supplemental Indentures, if any, except such as have been
obtained or made under the 1933 Act and such as may be
required under state securities laws in connection with the
purchase and distribution of such Securities by you;
(ix) After due inquiry, such counsel has no
knowledge of any legal or governmental proceeding pending or
threatened to which the Company or any of its subsidiaries is
a party or to which any of the properties of the Company or
any of its subsidiaries is subject that is required to be
described in the Registration Statement or the Prospectus and
is not so described therein; or of any statutes, regulations,
contracts or other documents that are required to be described
in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not
described or filed as required;
(x) If any Offered Securities to be issued are
convertible or exchangeable, the related Underlying Securities
are duly and validly authorized, have been duly reserved for
issuance upon conversion or exchange of the Offered
Securities, and when issued upon the conversion or exchange of
the Offered Securities, will be duly and validly issued and,
in the case of such Underlying Securities which are Common
Stock, fully paid and non-assessable;
(xi) If the Offered Securities are Preferred Stock
or Debt Securities convertible or exchangeable into Common
Stock, such counsel shall opine that all of the outstanding
shares of capital stock of the Company have been duly
authorized and are validly issued, fully paid and
non-assessable, and except as disclosed in the Prospectus none
of the outstanding shares of capital stock of the Company are
subject to any preemptive or similar rights; and
(xii) Each of the documents incorporated or deemed
to be incorporated by reference in the Registration
<PAGE> 23
23
Statement, at the time it was filed with the Commission,
complied as to form in all material respects with the
requirements for such document under the 1934 Act and the
regulations thereunder.
In addition, such counsel has participated in conferences with
officers and other representatives of the Company, representatives of
the independent public accountants for the Company, and the
Representatives, at which the contents of the Registration Statement
and the Prospectus and related matters were discussed and, although
such counsel is not passing upon, and does not assume any
responsibility for, the accuracy, completeness or fairness of the
statements contained in the Registration Statement and the Prospectus
and have not been called on to make and have not made any independent
check or verification thereof, during the course of such participation
(relying as to materiality to a large extent upon the statements of
officers and other representatives of the Company), no facts came to
such counsel's attention that caused such counsel to believe that the
Registration Statement, at the time it became effective, or if an
amendment to the Registration Statement or an annual report on Form
10-K has been filed by the Company with the Commission subsequent to
the effectiveness of the Registration Statement, then at the time such
post-effective amendment became effective or as of the most recent
filing, contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein not misleading, or that the Prospectus
(including the documents incorporated by reference therein but giving
effect to Rule 412 under the 1933 Act), as of the date of the most
recent Prospectus Supplement or the Prospectus (as supplemented) as of
the applicable Closing Time, contained an untrue statement of a
material fact or omitted to state a material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading; it being understood that such counsel
expresses no belief with respect to the financial statements and notes
and schedules thereto and other financial, accounting, tax and
statistical data included in (or incorporated in) the Registration
Statement or the Prospectus or with respect to the Statement of
Eligibility and Qualification of the Trustee on Form T-1, if any.
In rendering such opinion, Kantrow, Spaht, Weaver & Blizter (A
Professional Law Corporation) (or such other counsel) (i) may rely as
to factual matters upon certificates or written statements from
officers or other appropriate representatives of the Company and its
subsidiaries and upon certificates of public officials and (ii) need
not express any opinion with respect to the laws of any jurisdiction
other than the federal law of the United
<PAGE> 24
24
States and the law of the State of Louisiana. Further, such opinion
may contain assumptions, limitations, exceptions and restrictions
which are reasonably satisfactory to you and your counsel.
(d) At the Closing Time, each of you shall have received the
favorable opinion of Simpson Thacher & Bartlett as your counsel, dated
as of the applicable Closing Time, to the effect that the opinions
delivered pursuant to Sections 5(b) and 5(c) appear on their face to
be appropriately responsive to the requirements of this Agreement and
the applicable Terms Agreement except, specifying the same, to the
extent waived by you, and with respect to the Securities, this
Agreement and the applicable Terms Agreement, the Indentures, if any,
the Registration Statement, the Prospectus, the incorporation and
legal existence of the Company and such other related matters as you
may reasonably require. In giving such opinion, such counsel may
rely, as to all matters governed by the laws of jurisdictions other
than the federal law of the United States, the law of the State of New
York and the General Corporation Law of the State of Delaware, upon
the opinions of counsel satisfactory to you. Such counsel may also
state that, insofar as such opinion involves factual matters, they
have relied, to the extent they deem proper, upon certificates of
officers or other appropriate representatives of the Company and its
subsidiaries and certificates of public officials.
(e) At the applicable Closing Time, (i) the Registration
Statement and the Prospectus, as they may then be amended or
supplemented, shall contain all statements that are required to be
stated therein under the 1933 Act and the regulations thereunder and
in all material respects shall conform to the requirements of the 1933
Act and the regulations thereunder and the 1939 Act and the
regulations thereunder, and neither the Registration Statement nor the
Prospectus, as they may then be amended or supplemented, shall contain
an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading; (ii) there shall not have been, since the
respective dates as of which information is given in the Prospectus
(as supplemented), any material adverse change, or any development
involving a prospective material adverse change, in the condition
(financial or otherwise), properties, assets, business or results of
operations of the Company and its subsidiaries, considered as one
enterprise, whether or not arising in the ordinary course of business;
(iii) no action, suit or proceeding at law or in equity shall be
pending or, to the knowledge of the Company, threatened against the
Company or any of its subsidiaries that would be required to be set
forth in the Prospectus other than as set
<PAGE> 25
25
forth therein or in any supplement thereto and no proceedings shall be
pending or, to the knowledge of the Company, threatened against it or
any of its subsidiaries before or by any federal, state or other
commission, board or administrative agency wherein an unfavorable
decision, ruling or finding is reasonably likely to materially
adversely affect the condition (financial or otherwise), properties,
assets, business or results of operations of the Company and its
subsidiaries, considered as one enterprise, other than as set forth in
the Prospectus or in any supplement thereto; (iv) the Company shall
have complied with all agreements and satisfied all conditions on its
part to be performed or satisfied at or prior to the applicable
Closing Time; and (v) the other representations and warranties of the
Company set forth in Section 1(a) shall be accurate as though
expressly made at and as of the applicable Closing Time. At the
applicable Closing Time, each of you shall have received a certificate
of the President or a Vice President, and the Treasurer or Assistant
Treasurer, of the Company, dated as of the applicable Closing Time, to
such effect to such officer's knowledge.
(f) At the time that a Terms Agreement is executed by the
Company, each of you shall have received from Deloitte & Touche LLP or
such other nationally recognized independent public accountants who
are reporting on the audited financial statements and schedules
included or incorporated by reference in the Registration Statement a
letter dated the date thereof and also at the applicable Closing Time
a letter dated the date thereof, in each case in form and substance
satisfactory to the Representatives, containing statements and
information of the type ordinarily included in the accountant's
"comfort letters" to underwriters with respect to financial statements
and certain financial information contained in the Registration
Statement and the Prospectus.
(g) At the applicable Closing Time, your counsel shall have
been furnished with all such documents (including any consents under
any agreements to which the Company is a party), certificates and
opinions as they may reasonably request for the purpose of enabling
them to pass upon the issuance and sale of the Securities as
contemplated in this Agreement and the applicable Terms Agreement and
the matters referred to in Section 5(d) and in order to evidence the
accuracy and completeness of any of the representations, warranties or
statements of the Company, the performance of any of the covenants of
the Company, or the fulfillment of any of the conditions herein and in
the applicable Terms Agreement contained; and all proceedings taken by
the Company at or prior to the applicable Closing Time in connection
with the authorization, issuance and sale of the
<PAGE> 26
26
Offered Securities, and by the Company at or prior to the applicable
Closing Time in connection with the authorization and delivery of any
other Operative Documents, each as contemplated in this Agreement and
the applicable Terms Agreement, shall be reasonably satisfactory in
form and substance to you and to your counsel.
(h) If the Offered Securities to be sold to you pursuant to
an applicable Terms Agreement are to be listed on any securities
exchange, such Securities shall have been duly authorized for listing
on such exchange on the date of the applicable Terms Agreement,
subject only to official notice of issuance thereof and notice of a
satisfactory distribution of the Securities.
(i) On or after the date of the applicable Terms Agreement
(i) no downgrading shall have occurred in the rating accorded any of
the Company's debt securities or preferred stock by any "nationally
recognized statistical rating organization" as that term is defined by
the Commission for purposes of Rule 436(g)(2) under the 1933 Act and
regulations thereunder and (ii) no such organization shall have
publicly announced that it has under surveillance or review, with
possible negative implications, its rating of the Company's debt
securities or preferred stock.
(j) Each of the Indentures and the related Supplemental
Indentures, if any, shall have been executed and delivered by all
parties thereto on or prior to the Closing Time, in each case in
substantially the form last filed by the Company with the Commission,
and each such instrument shall be in full force and effect at the
Closing Time.
If any of the conditions specified in this Section 5 shall not
have been fulfilled when and as required by this Agreement or the applicable
Terms Agreement to be fulfilled, this Agreement and the applicable Terms
Agreement may be terminated by you on notice to the Company at any time at or
prior to the applicable Closing Time, and such termination shall be without
liability of any party to any other party, except as provided in Section 4.
Notwithstanding any such termination, the provisions of Sections 6 and 7 shall
remain in effect.
Section 6. Indemnification. (a) The Company agrees to
indemnify and hold harmless each of you and each person, if any, who controls
any of you within the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of an untrue
statement or alleged untrue statement of a material fact contained in
the Registration Statement (or any
<PAGE> 27
27
amendment thereto), including all documents incorporated or deemed to
be incorporated by reference in the Registration Statement, or the
omission or alleged omission therefrom of a material fact required to
be stated therein or necessary to make the statements therein not
misleading or arising out of an untrue statement or alleged untrue
statement of a material fact included in the Prospectus (or any
amendment or supplement thereto) or the omission or alleged omission
therefrom of a material fact necessary in order to make the statements
therein, in the light of the circumstances under which they were made,
not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or investigation or
proceeding by any governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of
the Company; and
(iii) against any and all expense whatsoever (including
fees and disbursements of counsel chosen by you (except to the extent
otherwise expressly provided in paragraph (c) of this Section 6))
reasonably incurred in investigating, preparing or defending against
any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or any claim whatsoever based
upon any such untrue statement or omission, or any such alleged untrue
statement or omission, to the extent that any such expense is not paid
under subparagraph (i) or (ii) above;
provided, however, that the Company's obligations under this indemnity do not
apply to any loss, liability, claim, damage or expense to the extent arising
out of an untrue statement or omission or alleged untrue statement or omission
made in the Registration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity
with written information furnished to the Company by any of you through the
Representatives expressly for use in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto);
and provided further, that as to any related preliminary prospectus or
preliminary prospectus supplement this indemnity agreement shall not inure to
the benefit of any Underwriter on account of any loss, claim, damage or
liability (or action in respect thereof) arising from the sale of Offered
Securities to any person by that Underwriter if that Underwriter failed to send
or give a copy of the Prospectus, as the same may be amended or supplemented,
to that person within the time required by the 1933 Act, and the untrue
statement or alleged untrue statement of any
<PAGE> 28
28
material fact or omission or alleged omission to state any material fact in
such preliminary prospectus or preliminary prospectus supplement was corrected
in the Prospectus, unless such failure resulted from non-compliance by the
Company with Section 3(b). For purposes of the second proviso to the
immediately preceding sentence, the term Prospectus shall not be deemed to
include the documents incorporated by reference therein, and no Underwriter
shall be obligated to send or give any supplement or amendment to any document
incorporated by reference in a preliminary prospectus, a preliminary prospectus
supplement or the Prospectus to any person other than a person to whom such
Underwriter has delivered such incorporated documents in response to a written
request therefor.
(b) Each of you agrees, severally and not jointly, to
indemnify and hold harmless the Company, each of its directors, each of their
respective officers who signed the Registration Statement, and each person, if
any, who controls the Company within the meaning of Section 15 of the 1933 Act
or Section 20 of the 1934 Act, against any and all loss, liability, claim,
damage and expense described in the indemnity contained in Section 6(a), as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by you through the Representatives expressly for use in the
Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto).
(c) Each indemnified party shall give prompt notice to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, enclosing a copy of all papers served, but
failure to so notify an indemnifying party shall not relieve it from any
liability that it may have otherwise than on account of this indemnity
agreement. An indemnifying party may participate at its own expense in the
defense of such action. If it so elects within a reasonable time after receipt
of such notice, an indemnifying party, jointly with any other indemnifying
parties receiving such notice, may assume the defense of such action with
counsel chosen by it and approved by the indemnified parties who are defendants
in such action, provided that, if such indemnified party or parties reasonably
determine that there may be legal defenses that are different from or in
addition to those available to such indemnifying party or parties, then such
indemnifying party or parties shall not be entitled to assume such defense. If
the indemnifying party or parties are not entitled to assume the defense of
such action as a result of the proviso to the preceding sentence, counsel for
the indemnifying party or parties shall be entitled to conduct the defense of
such indemnifying party or parties and counsel for the indemnified party or
parties shall be entitled to conduct the defense of such indemnified
<PAGE> 29
29
party or parties. If an indemnifying party assumes the defense of such action,
the indemnifying parties shall not be liable for any fees and expenses of
counsel for the indemnified parties incurred thereafter in connection with such
action. In no event shall the indemnifying party or parties be liable for the
fees and expenses of more than one counsel (in addition to any local counsel)
for all indemnified parties in connection with any one action or separate but
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances.
(d) No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could
have been a party and indemnity could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on claims that are the subject matter
of such proceeding. No indemnifying party shall be liable for any settlement
that an indemnified party may effect without the consent of the indemnifying
party, which consent shall not be unreasonably withheld.
Section 7. Contribution. In order to provide for just and
equitable contribution in circumstances under which the indemnity provided for
in Section 6 is for any reason held to be unenforceable by the indemnified
parties although applicable in accordance with its terms, the Company and each
of you shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity incurred by the
Company and one or more of you, in such proportions as will reflect the
relative benefits from the offering of such Securities received by the Company
on the one hand and by you, on the other hand, provided that if the Securities
are offered by you at an initial public offering price set forth in a
Prospectus Supplement, the relative benefits shall be deemed to be such that
you shall be responsible for that portion of the aggregate losses, liabilities,
claims, damages and expenses represented by the percentage that the
underwriting commission appearing on the cover page of the Prospectus
Supplement bears to the initial public offering price appearing thereon and the
Company shall be responsible for the balance; provided, however, that no person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1933 Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 7,
each person, if any, who controls any of you within the meaning of Section 15
of the 1933 Act shall have the same rights to contribution as you, and each
director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act or
<PAGE> 30
30
Section 20 of the 1934 Act shall have the same rights to contribution as the
Company.
Section 8. Representations, Warranties and Agreements to
Survive Delivery. The representations, warranties, indemnities, agreements and
other statements of the Company or its officers set forth in or made pursuant
to this Agreement will remain operative and in full force and effect regardless
of any termination of the applicable Terms Agreement (including this Agreement
as incorporated by reference therein), or any investigation made by or on
behalf of the Company or any of you or any controlling person and will survive
delivery of and payment for the Securities.
Section 9. Termination of Agreement. (a) The
Representatives may terminate the applicable Terms Agreement (including this
Agreement, as incorporated by reference therein), immediately by notice to the
Company, at any time at or prior to the applicable Closing Time (i) if there
has been, since the respective dates as of which information is given in the
Prospectus, any material adverse change, or any development involving a
prospective material adverse change, in the condition (financial or otherwise),
properties, assets, business or results of operations of the Company and its
subsidiaries, considered as one enterprise, whether or not arising in the
ordinary course of business, or (ii) if there has occurred any new outbreak of
hostilities or escalation of existing hostilities or other calamity or crisis
the effect of which on the financial markets of the United States is such as to
make it, in your reasonable judgment, impracticable to market the Securities or
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended by the Commission, or if trading
generally on either the New York Stock Exchange or the American Stock Exchange
has been suspended, or minimum or maximum prices for trading have been fixed,
or maximum ranges for prices for securities have been required, by either of
such exchanges or by order of the Commission or any other governmental
authority or (iv) if a general commercial banking moratorium has been declared
by either federal or New York authorities.
(b) If this Agreement is terminated pursuant to this Section
9, such termination shall be without liability of any party to any other party,
except to the extent provided in Section 4 hereof. Notwithstanding any such
termination, the covenants set forth in Section 3 with respect to any offering
of Securities purchased from the Company pursuant to the applicable Terms
Agreement and the provisions of Sections 6 and 7 shall remain in effect.
(c) This Agreement may also terminate pursuant to the
provisions of Sections 2, 5 and 10, with the effect stated in such Sections.
<PAGE> 31
31
Section 10. Default by One or More of the Underwriters. If
one or more of you shall fail at the applicable Closing Time to purchase the
Securities that such Underwriter or Underwriters are obligated to purchase
pursuant to the applicable Terms Agreement (the "Defaulted Securities"), the
Representatives shall have the right, within 24 hours thereafter, to make
arrangements for one or more of the non-defaulting Underwriters, or any other
substitute underwriters, to purchase all, but not less than all, of the
Defaulted Securities in such amounts as may be agreed upon and upon the terms
set forth in this Agreement; if, however, you have not completed such
arrangements within such 24-hour period, then:
(a) if the aggregate amount of Defaulted Securities does not
exceed 10% of the aggregate amount of the Securities to be purchased
pursuant to such Terms Agreement, the non-defaulting Underwriters
shall be obligated to purchase the full amount thereof in the
proportions that their respective underwriting obligation proportions
bear to the underwriting obligations of all non-defaulting
Underwriters, or
(b) if the aggregate amount of Defaulted Securities exceeds
10% of the aggregate amount of the Securities to be purchased pursuant
to such Terms Agreement, such Terms Agreement (including this
Agreement as incorporated by reference therein) shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section 10 shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default that does not result in a
termination of the applicable Terms Agreement, either the Representatives or
the Company shall have the right to postpone the applicable Closing Time for a
period not exceeding seven days in order to effect any required changes in the
Registration Statement or Prospectus or in any other documents or arrangements.
Section 11. Notices. All notices and other communications
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered, mailed or transmitted by any standard form of
telecommunication. Notices to you shall be directed to you as provided in the
applicable Terms Agreement. Notices to the Company shall be directed to it c/o
United Companies Financial Corporation, 4041 Essen Lane, Baton Rouge, Louisiana
70809, attention of Dale E. Redman, with copies to Kantrow, Spaht, Weaver &
Blitzer (A Professional Law Corporation), attention of Lee C. Kantrow and
Stroock & Stroock & Lavan, attention of Reed D. Auerbach.
<PAGE> 32
32
Section 12. Parties. The applicable Terms Agreement and this
Agreement are made solely for the benefit of each of you, the Company and, to
the extent expressed, any person controlling either the Company or any of you,
and the directors of the Company, the officers of the Company who have signed
the Registration Statement, and the executors, administrators, successors and
assigns of such persons and, subject to the provisions of Section 10, no other
person shall acquire or have any right under or by virtue of the applicable
Terms Agreement or this Agreement. The term "successors and assigns" shall not
include any purchaser, as such purchaser, from any of you of the Securities.
All of the obligations of each of you hereunder are several and not joint.
Section 13. Governing Law and Time. This Agreement and each
Terms Agreement shall be governed by the law of the State of New York without
regard to the conflicts of law principles thereof. Specified times of the day
refer to New York City time.
Very truly yours,
UNITED COMPANIES
FINANCIAL CORPORATION
By: _________________________
Name:
Title:
<PAGE> 33
Exhibit A(I)
UNITED COMPANIES FINANCIAL CORPORATION
(a Louisiana corporation)
$___________
Debt Securities
TERMS AGREEMENT
_______ __, 199_
To: United Companies Financial Corporation
4041 Essen Lane
Baton Rouge, Louisiana 70809
Dear Sirs:
Reference is made to the United Companies Financial Corporation
Securities Underwriting Agreement-Basic Provisions dated _____ __, 1994 (the
"Underwriting Agreement"). This Agreement is the Terms Agreement referred to
in the Underwriting Agreement. We offer to purchase, on and subject to the
terms and conditions of the Underwriting Agreement, the following securities
("Securities") on the following terms:
Title: ____________ due ____________
Principal Amount to be issued: $___________
Date of maturity: ____________
Interest rate: ____________%
Interest payment dates: ____________ and _________ of each
year
Public offering price: ____________%, plus accrued interest
from _____________
Purchase Price: ____________%, plus accrued interest
from _______________ (payable by
[wire transfer in same-day federal
funds, less one day's interest
at the federal funds rate]
[certified or official bank check
in New York Clearinghouse funds)]
<PAGE> 34
2
Underwriting Commission: _____%
Redemption provisions: [Redeemable at the option of
the Company in whole or in part on
and after _____________, ____ at
100% of principal amount plus
accrued interest to the date of
redemption.]
Conversion or ____________
Exchange Provisions:
Delayed Delivery Contracts: ____________
Closing date and location: ____________, 10:00 A.M.;
Simpson Thacher & Bartlett,
425 Lexington Avenue
New York, New York 10017
Additional co-managers, if any: ____________
Additional underwriters, if any: ____________
Other terms: ____________
The Company represents and warrants to each of us that the
representations and warranties of the Company set forth in Section 1 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof. All of the provisions contained in the Underwriting Agreement, a
copy of which is attached hereto as Annex A, are herein incorporated by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein.
Terms defined in such document are used herein as therein defined.
As contemplated by Section 2 of the Underwriting Agreement,
attached as Schedule A hereto is a completed list of our respective
underwriting commitments, which shall be a part of this Agreement and the
Underwriting Agreement.
This Agreement shall be governed by the laws of the State of
New York without regard to the conflicts of law principles thereof.
If the foregoing is in accordance with your understanding of
the agreement between the Underwriters and you, please sign and return to the
Underwriters a counterpart hereof,
<PAGE> 35
3
whereupon this instrument along with all counterparts and together with the
Underwriting Agreement shall be a binding
<PAGE> 36
4
agreement between the Underwriters and you in accordance with its terms and the
terms of the Underwriting Agreement.
Very truly yours,
[ ]
By: ________________________
Confirmed and accepted as of
the date first above written:
UNITED COMPANIES
FINANCIAL CORPORATION
By: ________________________
Name:
Title:
<PAGE> 37
Exhibit A(II)
UNITED COMPANIES FINANCIAL CORPORATION
(a Louisiana corporation)
Equity Securities
TERMS AGREEMENT
_______ __, 199_
To: United Companies Financial Corporation
4041 Essen Lane
Baton Rouge, Louisiana 70809
Dear Sirs:
Reference is made to the United Companies Financial Corporation
Securities Underwriting Agreement-Basic Provisions dated _____ __, 1994 (the
"Underwriting Agreement"). This Agreement is the Terms Agreement referred to
in the Underwriting Agreement. We offer to purchase, on and subject to the
terms and conditions of the Underwriting Agreement, the following securities
("Securities") on the following terms:
Title: Preferred Stock, Series __
Number of Shares to be issued: ___________ shares
Voting Rights: ____________
Dividends: [cash] dividends of $ to
$ per share payable quarterly
in arrears on __________, _________,
____________, and __________ ___
Public offering price: $____________ per share
Purchase Price: $____________ per share (payable by
[wire transfer in same-day federal
funds, less one day's interest at
the federal funds rate] [certified
or official bank check in New York
Clearinghouse funds)]
Underwriting Commission: _____%
<PAGE> 38
2
Redemption provisions: ____________
Liquidation Preference: $____________ per share plus .
Conversion or Exchange ____________
Provisions:
Over-Allotment Option: ____________
Closing date and location: ____________ , 10:00 A.M.;
Simpson Thacher & Bartlett,
425 Lexington Avenue
New York, New York 10017
Additional co-managers, if any: ____________
Additional underwriters, if any: ____________
Other Terms: ____________
Name of Transfer Agent and ____________
Registrar:
The Company represents and warrants to each of us that the
representations and warranties of the Company set forth in Section 1 of the
Underwriting Agreement are accurate as though expressly made at and as of the
date hereof. All of the provisions contained in the Underwriting Agreement, a
copy of which is attached hereto as Annex A, are herein incorporated by
reference in their entirety and shall be deemed to be a part of this Agreement
to the same extent as if such provisions had been set forth in full herein.
Terms defined in such document are used herein as therein defined.
As contemplated by Section 2 of the Underwriting Agreement,
attached as Schedule A hereto is a completed list of our respective
underwriting commitments, which shall be a part of this Agreement and the
Underwriting Agreement.
This Agreement shall be governed by the laws of the State of
New York without regard to the conflicts of law principles thereof.
If the foregoing is in accordance with your understanding of
the agreement between the Underwriters and you, please sign and return to the
Underwriters a counterpart hereof,
<PAGE> 39
3
whereupon this instrument along with all counterparts and together with the
Underwriting Agreement shall be a binding agreement between the Underwriters
and you in accordance with its terms and the terms of the Underwriting
Agreement.
Very truly yours,
[ ]
By: ________________________
Confirmed and accepted as of
the date first above written:
UNITED COMPANIES
FINANCIAL CORPORATION
By: ________________________
Name:
Title:
<PAGE> 40
SCHEDULE A
<TABLE>
<CAPTION>
Principal Amount
of Debt Securities
to be Purchased/
Number of Shares of
Underwriter Preferred Stock
----------- -------------------
<S> <C>
[ ] . . . . . . . . . . . . . . . . . . . . . .
[ ] . . . . . . . . . . . . . . . . . . . . . .
[ ] . . . . . . . . . . . . . . . . . . . . . .
-------------------
Total . . . . . . . . . . . . . . . .
-------------------
</TABLE>
<PAGE> 41
Exhibit B
United Companies Financial Corporation
c/o [Manager's Address]
Attention:
Dear Sirs:
The undersigned hereby agrees to purchase from United
Companies Financial Corporation (the "Company"), and the Company agrees to sell
to the undersigned, on ____________, 19__ (the "Delivery Date"), $____________
principal amount of the Company's ___% [Notes][Debentures] due ____________,
19__ (the "Securities"), offered by the Company's Prospectus dated
____________, 19__, as supplemented by its Prospectus Supplement dated
____________, 19__, receipt of which is hereby acknowledged, at a purchase
price of ___% of the principal amount thereof, plus accrued interest from
____________, 19__, to the Delivery Date, and on the further terms and
conditions set forth in this contract.
Payment for the Securities which the undersigned has agreed to
purchase on the Delivery Date shall be made to the Company or its order by
certified or official bank check in New York Clearing House funds, at the
office of the Underwriters, on the Delivery Date, upon delivery to the
undersigned of the Securities to be purchased by the undersigned in definitive
form and in such denominations and registered in such names as the undersigned
may designate by written or telegraphic communication addressed to the Company
not less than five full business days prior to the Delivery Date.
The obligations of the undersigned to take delivery of and
make payment for Securities on the Delivery Date shall be subject only to the
conditions that (1) the purchase of Securities to be made by the undersigned
shall not on the Delivery Date be prohibited under the laws of the jurisdiction
to which the undersigned is subject and (2) the Company, on or before
____________, 19__, shall have sold to the Underwriters of the Securities (the
"Underwriters") such principal amount of the Securities as is to be sold to
them pursuant to the Terms Agreement dated ____________, 19__ between the
Company and the Underwriters. The obligation of the undersigned to take
delivery of and make payment for Securities shall not be affected by the
failure of any purchaser to take delivery of and make payment for Securities
pursuant to other contracts similar to this contract. The undersigned
represents and warrants to you that its investment in the Securities is not, as
of the date hereof, prohibited under the laws of any jurisdiction to which the
undersigned is subject and which govern such investment.
<PAGE> 42
2
Promptly after completion of the sale to the Underwriters, the
Company will mail or deliver to the undersigned at its address set forth below
notice to such effect, accompanied by a copy of the opinion of counsel for the
Company delivered to the Underwriters in connection therewith.
By the execution hereof, the undersigned represents and
warrants to the Company that all necessary corporate action for the due
execution and delivery of this contract and the payment for and purchase of the
Securities has been taken by it and no further authorization or approval of any
governmental or other regulatory authority is required for such execution,
delivery, payment or purchase, and that, upon acceptance hereof by the Company
and mailing or delivery of a copy as provided below, this contract will
constitute a valid and binding agreement of the undersigned in accordance with
its terms.
This contract will inure to the benefit of and be binding upon
the parties hereto and their respective successors, but will not be assignable
by either party hereto without the written consent of the other.
It is understood that the Company will not accept Delayed
Delivery Contracts for an aggregate principal amount of Securities in excess of
$____________ and that the acceptance of any delayed Delivery Contract is in
the Company's sole discretion and, without limiting the foregoing, need not be
on a first-come, first-served basis. If this contract is acceptable to the
Company, it is requested that the Company sign the form of acceptance on a copy
hereof and mail or deliver a signed copy hereof to the undersigned at its
address set forth below. This
<PAGE> 43
3
will become a binding contract between the Company and the undersigned when
such copy is mailed or delivered.
This Agreement shall be governed by the laws of the State of
New York without regard to the conflicts of law principles thereof.
Yours very truly,
______________________________
(Name of Purchaser)
By____________________________
(Title)
______________________________
______________________________
(Address)
Accepted as of the date
first above written.
United Companies
Financial Corporation
By________________________
PURCHASER - PLEASE COMPLETE AT TIME OF SIGNING
The name and telephone number of the representative of the
Purchaser with whom details of delivery on the Delivery Date may be discussed
is as follows: (Please print.)
<TABLE>
<CAPTION>
Telephone No.
Name (Including Area Code)
- ---- ------------------------
<S> <C>
</TABLE>
<PAGE> 1
EXHIBIT 4.7
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
UNITED COMPANIES FINANCIAL CORPORATION
On _________, 19__, pursuant to the authority granted to and vested in
the Board of Directors (hereinafter called the "Board of Directors" or the
"Board") of United Companies Financial Corporation, a corporation organized and
existing under the Louisiana Business Corporation Law (hereinafter called the
"Corporation"), and in accordance with the provisions of Section 33 of the
Louisiana Business Corporation Law and Article III of the Corporation's
Articles of Incorporation (the "Articles of Incorporation"), the Board of
Directors voted in favor of amending Article III of the Articles of
Incorporation to create a series of preferred stock, par value $2.00, of the
Corporation and to state the designation and number of shares, and to fix the
preferences, limitations and relative rights thereof, all as set forth
hereinafter.
"SECTION 6 -- ____% [CUMULATIVE] [CONVERTIBLE] PREFERRED STOCK, SERIES
___, ISSUE PRICE $_______ PER SHARE.
PARAGRAPH 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as _____% [Cumulative] [Convertible] Preferred Stock, Series
____, Issue Price $______ per share (the "Preferred Stock"), and the number of
shares constituting the Preferred Stock shall be __________. Such number of
shares may be decreased by a resolution adopted by the Board of Directors;
provided, that no decrease shall reduce the number of shares of the Preferred
Stock to a number less than the number of shares then outstanding plus the
number of shares reserved for issuance upon the exercise of outstanding
options, rights, or warrants or upon the conversion of any outstanding
securities issued by the Corporation that are convertible into the Preferred
Stock.
PARAGRAPH 2. RANKING. Any class or classes of stock of the
Corporation shall be deemed to rank as provided in this Paragraph 2:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 3. DIVIDENDS.
(a) For purposes of this Paragraph 3, each of ___________________
____________________, on which any share of the Preferred Stock shall be
outstanding shall be deemed to be a "Dividend Payment Date." Commencing on
____________, 19___, the holders of shares of the Preferred Stock shall be
entitled to receive, when and as declared by the Board of Directors of the
Corporation out of funds legally available therefor, [cumulative] dividends
payable in arrears at the rate of $______ per year on each share of the
Preferred Stock and no more. Dividends payable on ___________, 19___ shall be
prorated based on the number of days that shall have elapsed since the date of
original issue of the Preferred Stock. Dividends payable on the Preferred
Stock for any period greater or less than a full dividend period shall be
computed on the basis of a 360-day year consisting of twelve 30-day months.
(b) The Board of Directors may fix a record date for the
determination of holders of shares of the Preferred Stock entitled to receive
payment of a dividend declared thereon, which record date shall be not more
than ____ days prior to the date fixed for the payment thereof.
(c) On each Dividend Payment Date, all dividends which shall have
accrued on each share of the Preferred Stock outstanding on such Dividend
Payment Date shall accumulate and be deemed to become
<PAGE> 2
"due." Any dividend which shall not be paid on the Dividend Payment Date on
which it shall become due shall be deemed to be "past due" until such dividend
shall be paid or until the share of the Preferred Stock with regard to which
such dividend became due shall no longer be outstanding, whichever is the
earlier to occur. No interest or sum of money in lieu of interest shall be
payable with regard to any dividend payment or payments which are past due.
Dividends paid on shares of the Preferred Stock in an amount less than the
total amount of such dividends at the time accumulated and payable on such
shares shall be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding.
(d) Other provisions relating to dividends on the outstanding shares
of the Preferred Stock are set forth below in this Paragraph 3:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 4. GENERAL, CLASS AND SERIES, AND VOTING RIGHTS. The voting
rights, if any, and certain other provisions relating to the Preferred Stock
shall be as provided in this Paragraph 4:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 5. REDEMPTION.
(a) The shares of the Preferred Stock shall be redeemable as
provided in this Paragraph 5:
_______________________________________________________________________
________________________________________________________________________________
_____________________________.
PARAGRAPH 6. CONVERSION.
(a) The shares of the Preferred Stock shall be convertible as
provided in this Paragraph 6:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 7. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any voluntary or involuntary dissolution,
liquidation or winding up of the Corporation (for the purposes of this
Paragraph 7, a "Liquidation"), the holder of each share of the Preferred Stock
then outstanding shall be entitled to be paid, out of the assets of the
Corporation available for distribution to its stockholders, in accordance with
the provisions of this Paragraph 7:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 8. PAYMENTS.
(a) The Corporation may provide funds for any payment of any
amount distributable with respect to any the Preferred Stock under Paragraph(s)
___ hereof as set forth in this Paragraph 8:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
<PAGE> 3
PARAGRAPH 9. STATUS OF REACQUIRED SHARES. Shares of the Preferred
Stock issued and reacquired by the Corporation (including, without limitation,
shares of the Preferred Stock which have been redeemed pursuant to the terms of
Paragraph 5 hereof and shares of the Preferred Stock which have been converted
into shares of Common Stock) shall have the status of authorized and unissued
shares of Preferred Stock, undesignated as to series and subject to later
issuance.
PARAGRAPH 10. PREEMPTIVE RIGHTS. Holders of shares of the Preferred
Stock are entitled to such preemptive or subscription rights, if any, in
respect of any securities of the Corporation as provided in this Paragraph 10:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
PARAGRAPH 11. LEGAL HOLIDAYS. For purposes hereof, legal holidays
shall be treated as provided in this Paragraph 11:
_______________________________________________________________________
________________________________________________________________________________
______________________________.
Executed this _______ day of _____________, __, 19___, by the
undersigned officers of the Corporation in the presence of the undersigned
competent witnesses.
UNITED COMPANIES
WITNESSES: FINANCIAL CORPORATION
______________________________
By:___________________________
Name:_____________________________
Title:____________________________
______________________________
By:__________________________________
Name:__________________, Secretary
- 3 -
<PAGE> 4
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
I, _______________________, a Notary Public duly qualified and
commissioned in and for the Parish and State aforesaid, do hereby certify that
on this ____ day of ________, 19___, personally appeared before me
_______________________ and ____________________, who, being by me first duly
sworn, declared and acknowledged that they are the ___________________ and
Secretary, respectively, of United Companies Financial Corporation, that they
signed the foregoing document as ___________________ and Secretary,
respectively, of that Corporation and the statements contained therein are
true.
________________________ Notary
Public
- 4 -
<PAGE> 1
EXHIBIT 4.8
SERIES ____________ SERIES ____________
PREFERRED STOCK PREFERRED STOCK
UNITED COMPANIES FINANCIAL CORPORATION
Incorporated under the laws of
the State of Louisiana
Number P _______ Shares _______
See Reverse for
Certain Definitions CUSIP ________________________________
This Certificate is transferable
in New York, New York and
in ____________________________.
This certifies that ______________________________________ is the
owner of _________________________ fully paid and non-assessable shares of the
series ________________ preferred stock, $2.00 par value per share, of UNITED
COMPANIES FINANCIAL CORPORATION transferable in person or by duly authorized
attorney upon surrender of this certificate properly endorsed. This
certificate and the shares represented hereby are subject to the provision of
the Articles of Incorporation, all amendments thereto, and the Bylaws of the
Corporation, and to the rights, preferences and voting powers of the Preferred
Stock of the Corporation now or hereinafter outstanding, the terms of all such
provisions, rights, preferences and voting powers being incorporated herein by
reference. This certificate is not valid until countersigned by the Transfer
Agent and registered by the Registrar.
WITNESS the facsimile seal of the Corporation and the facsimile
signatures of its duly authorized officers.
Dated
Secretary Chairman
Countersigned and Registered:
[NAME OF TRANSFER AGENT] [SEAL]
Transfer Agent and Registrar
By
Authorized Officer
<PAGE> 2
[Reverse Side of Preferred Stock Certificate]
UNITED COMPANIES FINANCIAL CORPORATION
THIS CORPORATION WILL FURNISH TO ANY SHAREHOLDER UPON REQUEST AND
WITHOUT CHARGE, A SUMMARY OF THE DESIGNATIONS, RELATIVE RIGHTS, PREFERENCES AND
LIMITATIONS OF THE SHARES OF EACH CLASS AND OF EACH SERIES OF PREFERRED OR
SPECIAL CLASS OF ITS AUTHORIZED CAPITAL STOCK, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD TO ESTABLISH OTHER SERIES AND TO FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF THE SHARES OF ANY CLASS OR
SERIES BY AMENDMENT OF THE ARTICLES.
__________
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
__________
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -- a tenants in common
TEN ENT -- as tenants by the entireties
JT TEN -- as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT -- __________ Custodian __________
(Cust) (Minor)
under Uniform Gifts to Minors Act
____________ (State)
Additional abbreviations may also be used though not in the above list.
2
<PAGE> 3
FOR VALUE RECEIVED the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE
- -------------------------------------------------
- -------------------------------------------------
(Please print or typewrite name and address of assignee)
________________________________________________________________________________
_______________________________________________________________________shares
of the preferred stock represented by the within Certificate and does hereby
irrevocably constitute and appoint ____________________________________________
Attorney to transfer the said stock on the books of the within named
Corporation with full power of substitution in the premises.
Dated:
Signature _______________________________________________________________
NOTICE: The signature to this assignment must correspond with the name
as written upon the face of the Certificate in every
particular, without alteration or enlargement or any change
whatever.
Signature Guaranteed:
_________________________________
_________________________________
3
<PAGE> 1
EXHIBIT 4.9
ARTICLES OF AMENDMENT TO THE
ARTICLES OF INCORPORATION OF
UNITED COMPANIES FINANCIAL CORPORATION
On June 12, 1995, pursuant to the authority granted to and vested in
the Board of Directors (hereinafter called the "Board of Directors" or the
"Board") of United Companies Financial Corporation, a corporation organized and
existing under the Louisiana Business Corporation Law (hereinafter called the
"Corporation"), and in accordance with the provisions of Section 33 of the
Louisiana Business Corporation Law and Article III of the Corporation's
Articles of Incorporation (the "Articles of Incorporation") and in view of the
fact that no shares of the Corporation's 6.5% Cumulative Convertible Preferred
Stock, Series A, Issue Price $25.00 per share authorized under present Section
6 of Article III remain outstanding, the Executive Committee of the Board of
Directors, duly authorized by the Board of Directors, voted in favor of
amending Article III of the Articles of Incorporation to (i) eliminate present
Section 6 thereof in its entirety and (ii) to add a new Section 6 thereto in
order to create a new series of preferred stock, par value $2.00, of the
Corporation and to state the designation and number of shares, and to fix the
preferences, limitations and relative rights thereof, all as set forth
hereinafter.
"SECTION 6 -- 6 3/4% PRIDES, CONVERTIBLE PREFERRED STOCK, PAR VALUE
$2.00 PER SHARE.
PARAGRAPH 1. DESIGNATION AND AMOUNT. The shares of such series shall
be designated as "6 3/4% PRIDES(SM), Convertible Preferred Stock, par value
$2.00 per share" (the "PRIDES"). The PRIDES are Preferred Redeemable Increased
Dividend Equity Securities(SM). The authorized number of shares constituting
the PRIDES shall be 1,955,000.
(SM)Service mark of Merrill Lynch & Co., Inc.
PARAGRAPH 2. DIVIDENDS.
(a) The holders of outstanding shares of PRIDES shall be entitled
to receive, when, as and if declared by the Board of Directors out of funds
legally available therefor, cumulative preferential dividends from June 16,
1995, at the rate per share of $2.97 per annum, and no more, payable quarterly
for each share of PRIDES, payable in arrears on the 1st day of each January,
April, July and October, respectively (each such date being hereinafter
referred to as a "Dividend Payment Date"), or, if any Dividend Payment Date is
not a business day, then the Dividend Payment Date shall be the next succeeding
business day; provided, however, that, with respect to any dividend period
during which a redemption occurs, the Corporation may, at its option, declare
accrued dividends to, and pay such dividends on, the redemption date, in which
case such dividends would be payable on the redemption date in cash to the
holders of the shares of PRIDES as of the record date for such dividend payment
and such accrued dividends would not be included in the calculation of the
related Call Price (as hereinafter defined). Each dividend on the shares of
PRIDES shall be payable to holders of record as they appear on the stock
register of the Corporation on such record date, not less than 10 nor more than
60 days preceding the payment dates thereof, as shall be fixed by the Board of
Directors. The first dividend payment shall be for the period from June 16,
1995 to but excluding July 1, 1995 and
<PAGE> 2
the first dividend will be payable on July 1, 1995. Dividends (or amounts
equal to accrued and unpaid dividends) payable on shares of PRIDES for any
period less than a full quarterly dividend period will be computed on the basis
of a 360-day year of twelve 30-day months and the actual number of days elapsed
in any period less than one month.
Dividends on the shares of PRIDES will accrue whether or not there are
funds legally available for the payment of such dividends and whether or not
such dividends are declared on a daily basis from the previous Dividend Payment
Date. Accumulated unpaid dividends shall not bear interest. Dividends will
cease to accrue in respect of shares of PRIDES on the Mandatory Conversion Date
(as hereinafter defined) or on the date of their earlier conversion or
redemption.
The shares of PRIDES will rank on a parity, both as to payment of
dividends and distribution of assets upon liquidation, with any future
preferred stock issued by the Corporation (the "Preferred Stock") that by its
terms ranks pari passu with the shares of PRIDES.
(b) As long as any shares of PRIDES are outstanding, no dividends
for any dividend period (other than dividends payable in shares of, or
warrants, rights or options exercisable for or convertible into shares of,
Common Stock (as defined below) or any other capital stock of the Corporation
ranking junior to the shares of PRIDES as to the payment of dividends and the
distribution of assets upon liquidation ("Junior Stock") and cash in lieu of
fractional shares of such Junior Stock in connection with any such dividend)
will be paid in cash or otherwise, nor will any other distribution be made
(other than a distribution payable in Junior Stock and cash in lieu of
fractional shares of such Junior Stock in connection with any such
distribution), on any Junior Stock unless: (i) full dividends on all
outstanding shares of Preferred Stock (including the shares of PRIDES), that
does not constitute Junior Stock ("Parity Preferred Stock") have been paid, or
declared and set aside for payment, for all dividend periods terminating on or
prior to the date of such Junior Stock dividend or distribution payment to the
extent such dividends are cumulative; (ii) dividends in full, in the case of a
dividend payment with respect to Junior Stock, for any Parity Preferred Stock
dividend period commencing on or prior to the date of such Junior Stock
dividend payment or, in the case of any other distribution with respect to
Junior Stock, for the current quarterly dividend period, have been paid, or
declared and set aside for payment, on all outstanding shares of Parity
Preferred Stock to the extent such dividends are cumulative; (iii) the
Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any outstanding shares of Parity Preferred Stock; and (iv)
the Corporation is not in default on any of its obligations to redeem any
outstanding shares of Parity Preferred Stock.
In addition, as long as any shares of PRIDES are outstanding, no
shares of any Junior Stock may be purchased, redeemed, or otherwise acquired by
the Corporation or any of its subsidiaries (except in connection with a
reclassification or exchange of any Junior Stock through the issuance of other
Junior Stock (and cash in lieu of fractional shares of such Junior Stock in
connection therewith) or the purchase, redemption, or other acquisition of any
Junior Stock with any Junior Stock (and cash in lieu of fractional shares of
such Junior Stock in connection therewith)) nor may any funds be set aside or
made available for any sinking fund for the
- 2 -
<PAGE> 3
purchase or redemption of any Junior Stock unless: (i) full dividends on all
outstanding shares of Parity Preferred Stock have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to the
date of such purchase, redemption or acquisition to the extent such dividends
are cumulative; (ii) the Corporation has paid or set aside all amounts, if any,
then or theretofore required to be paid or set aside for all purchase,
retirement, and sinking funds, if any, for any outstanding shares of Parity
Preferred Stock; and (iii) the Corporation is not in default on any of its
obligations to redeem any outstanding shares of Parity Preferred Stock.
Subject to the provisions described above, such dividends or other
distributions (payable in cash, property, or Junior Stock) as may be determined
by the Board of Directors may be declared and paid on the shares of any Junior
Stock from time to time and Junior Stock may be purchased, redeemed or
otherwise acquired by the Corporation or any of its subsidiaries from time to
time. In the event of the declaration and payment of any such dividends or
other distributions, the holders of such Junior Stock will be entitled, to the
exclusion of holders of any outstanding Parity Preferred Stock, to share
therein according to their respective interests.
As long as any shares of PRIDES are outstanding, dividends for any
dividend period or other distributions may not be paid on any outstanding
shares of Parity Preferred Stock (other than dividends or other distributions
payable in Junior Stock and cash in lieu of fractional shares of such Junior
Stock in connection therewith), unless either: (a) (i) full dividends on all
outstanding shares of Parity Preferred Stock have been paid, or declared and
set aside for payment, for all dividend periods terminating on or prior to the
date of such Parity Preferred Stock dividend or distribution payment to the
extent such dividends are cumulative; (ii) dividends in full, in the case of a
dividend payment, for any Parity Preferred Stock dividend period commencing on
or prior to the date of such dividend payment or, in the case of any other
distribution, for the current quarterly dividend period, have been paid, or
declared and set aside for payment, on all outstanding shares of Parity
Preferred Stock to the extent such dividends are cumulative: (iii) the
Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any outstanding shares of Parity Preferred Stock; and (iv)
the Corporation is not in default on any of its obligations to redeem any
outstanding shares of Parity Preferred Stock; or (b) any such dividends are
declared and paid pro rata so that the amounts of any dividends declared and
paid per share on outstanding shares of PRIDES and each other share of such
Parity Preferred Stock will in all cases bear to each other the same ratio that
accrued and unpaid dividends (including any accumulation with respect to unpaid
dividends for prior dividend periods, if such dividends are cumulative) per
share of outstanding shares of PRIDES and such other outstanding shares of
Parity Preferred Stock bear to each other.
In addition, as long as any shares of PRIDES are outstanding, the
Corporation may not purchase, redeem or otherwise acquire any Parity Preferred
Stock (except with any Junior Stock and cash in lieu of fractional shares of
such Junior Stock in connection therewith) unless: (i) full dividends on Parity
Preferred Stock have been paid, or declared and set aside for payment, for all
dividend periods terminating on or prior to the date of such Parity Preferred
Stock purchase, redemption or other acquisition payment to the extent such
dividends are cumulative; (ii) the
- 3 -
<PAGE> 4
Corporation has paid or set aside all amounts, if any, then or theretofore
required to be paid or set aside for all purchase, retirement, and sinking
funds, if any, for any Parity Preferred Stock; and (iii) the Corporation is not
in default on any of its obligations to redeem any Parity Preferred Stock.
(c) Any dividend payment made on the shares of PRIDES shall first be
credited against the earliest accrued but unpaid dividend due with respect to
the shares of PRIDES.
(d) All dividends paid with respect to the shares of PRIDES shall be
paid pro rata to the holders entitled thereto.
(e) Holders of the shares of PRIDES shall be entitled to receive
dividends in preference to and in priority over any dividends upon any shares
of the Corporation ranking junior to the shares of PRIDES as to dividends, but
subject to the rights of holders of shares of the Corporation having a
preference and a priority over the payment of dividends on the shares of
PRIDES.
PARAGRAPH 3. REDEMPTIONS AND CONVERSIONS.
(a) Mandatory Conversion. On July 1, 2000 (the "Mandatory
Conversion Date"), each outstanding share of PRIDES shall convert automatically
(the "Mandatory Conversion") into shares of Common Stock at the Common
Equivalent Rate (as hereinafter defined) in effect on the Mandatory Conversion
Date and the right to receive an amount in cash equal to all accrued and unpaid
dividends on such share of PRIDES (other than previously declared dividends
payable to a holder of record on a prior date) to the Mandatory Conversion
Date, whether or not declared, out of funds legally available for the payment
of dividends, subject to the right of the Corporation to redeem the shares of
PRIDES on or after July 1, 1998 (the "Initial Redemption Date") and prior to
the Mandatory Conversion Date, as described below, and subject to the
conversion of the shares of PRIDES at the option of the holder at any time
prior to the Mandatory Conversion Date. The Common Equivalent Rate is
initially one share of Common Stock for each share of PRIDES and is subject to
adjustment as set forth below. Dividends on the shares of PRIDES shall cease
to accrue and such shares shall cease to be outstanding on the Mandatory
Conversion Date. The Corporation shall make such arrangements as it deems
appropriate for the issuance of certificates representing shares of Common
Stock and for the payment of cash in respect of such accrued and unpaid
dividends, if any, or cash in lieu of fractional shares, if any, in exchange
for and contingent upon surrender of certificates representing the shares of
PRIDES, and the Corporation may defer the payment of dividends on such shares
of Common Stock and the voting thereof until, and make such payment and voting
contingent upon, the surrender of such certificates representing the shares of
PRIDES, provided that the Corporation shall give the holders of the shares of
PRIDES such notice of any such actions as the Corporation deems appropriate and
upon such surrender such holders shall be entitled to receive such dividends
declared and paid on such shares of Common Stock subsequent to the Mandatory
Conversion Date. Amounts payable in cash in respect of the shares of PRIDES or
in respect of such shares of Common Stock shall not bear interest.
- 4 -
<PAGE> 5
(b) Redemption by the Corporation.
(i) Right to Redeem. Shares of PRIDES are not redeemable by
the Corporation prior to the Initial Redemption Date. At any time and from
time to time on or after the Initial Redemption Date and prior to the Mandatory
Conversion Date, the Corporation shall have the right to redeem, in whole or in
part, the outstanding shares of PRIDES. Upon any such redemption, the
Corporation shall deliver to the holders of shares of PRIDES, in accordance
with the provisions of this Section 6, in exchange for each share so redeemed,
the greater of (A) a number of shares of Common Stock equal to the Call Price
in effect on the redemption date, divided by the Current Market Price (as
hereinafter defined) of the Common Stock determined as of the second trading
day immediately preceding the Notice Date (as hereinafter defined) or (B) .826
of a share of Common Stock (subject to adjustment in the same manner as the
Optional Conversion Rate (as hereinafter defined) is adjusted). The public
announcement of any call for redemption shall be made prior to, or at the time
of, the mailing of the notice of such call to holders of shares of PRIDES as
described below. If fewer than all the outstanding shares of PRIDES are to be
redeemed, shares of PRIDES to be redeemed shall be selected by the Corporation
from outstanding shares of PRIDES not previously redeemed by lot or pro rata
(as nearly as may be practicable) or by any other method determined by the
Board of Directors in its sole discretion to be equitable. As used in this
subparagraph (b), the term "Notice Date" with respect to any notice given by
the Corporation in connection with a redemption of shares of PRIDES means the
date on which first occurs either the public announcement of such redemption or
the commencement of mailing of such notice to the holders of shares of PRIDES.
(ii) Notice of Redemption. The Corporation shall provide notice of
any redemption of the shares of PRIDES to holders of record of PRIDES to be
called for redemption not less than 15 nor more than 60 days prior to the date
fixed for such redemption. Such notice shall be provided by mailing notice of
such redemption first class postage prepaid, to each holder of record of shares
of PRIDES to be redeemed, at such holder's address as it appears on the stock
register of the Corporation; provided, however, that neither failure to give
such notice nor any defect therein shall affect the validity of the proceeding
for the redemption of any shares of PRIDES to be redeemed except as to the
holders to whom the Corporation has failed to give said notice or whose notice
was defective.
Each such notice shall state, as appropriate, the following and may
contain such other information as the Corporation deems advisable:
(A) the redemption date;
(B) that all outstanding shares of PRIDES are to be
redeemed or, in the case of a call for redemption of
fewer than all outstanding shares of PRIDES, the
number of such shares held by such holder to be
redeemed;
(C) the number of shares of Common Stock deliverable upon
redemption of each share of PRIDES to be redeemed
and, if applicable, the Call Price
- 5 -
<PAGE> 6
and the Current Market Price used to calculate such
number of shares of Common Stock;
(D) the place or places where certificates for such
shares are to be surrendered for redemption; and
(E) that dividends on the shares of PRIDES to be redeemed
shall cease to accrue on such redemption date (except
as otherwise provided herein).
(iii) Deposit of Shares and Funds. The Corporation's obligation to
deliver shares of Common Stock and provide funds upon redemption in accordance
with this Paragraph 3 shall be deemed fulfilled if, on or before a redemption
date, the Corporation shall irrevocably deposit, with a bank or trust company,
or an affiliate of a bank or trust company, having an office or agency in New
York City and having a capital and surplus of at least $50,000,000, or shall
set aside or make other reasonable provision for the issuance of such number of
shares of Common Stock as are required to be delivered by the Corporation
pursuant to this Paragraph 3 upon the occurrence of the related redemption (and
for the payment of cash in lieu of the issuance of fractional share amounts and
accrued and unpaid dividends payable in cash on the shares to be redeemed as
and to the extent provided by this Paragraph 3). Any interest accrued on such
funds shall be paid to the Corporation from time to time. Any shares of Common
Stock or funds so deposited and unclaimed at the end of two years from such
redemption date shall be repaid and released to the Corporation, after which
the holder or holders of such shares of PRIDES so called for redemption shall
look only to the Corporation for delivery of such shares of Common Stock or
funds.
(iv) Surrender of Certificates; Status. Each holder of shares of
PRIDES to be redeemed shall surrender the certificates evidencing such shares
(properly endorsed or assigned for transfer, if the Board of Directors shall so
require and the notice shall so state) to the Corporation at the place
designated in the notice of such redemption and shall thereupon be entitled to
receive certifIcates evidencing shares of Common Stock and to receive any funds
payable pursuant to this Paragraph 3 following such surrender and following the
date of such redemption. In case fewer than all the shares represented by any
such surrendered certificate are called for redemption, a new certificate shall
be issued at the expense of the Corporation representing the unredeemed shares.
If such notice of redemption shall have been given, and if on the date fixed
for redemption, shares of Common Stock and funds necessary for the redemption
shall have been irrevocably either set aside by the Corporation separate and
apart from its other funds or assets in trust for the account of the holders of
the shares to be redeemed or converted (and so as to be and continue to be
available therefor) or deposited with a bank or a trust company or an affiliate
thereof as provided herein or the Corporation shall have made other reasonable
provision therefor, then, notwithstanding that the certificates evidencing any
shares of PRIDES so called for redemption or subject to conversion shall not
have been surrendered, the shares represented thereby so called for redemption
shall be deemed no longer outstanding, dividends with respect to the shares so
called for redemption shall cease to accrue on the date fixed for redemption
(except that holders of shares of PRIDES at the close of business on a record
date for any payment of dividends shall be entitled to receive the dividend
- 6 -
<PAGE> 7
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the redemption of such shares following such record date and
prior to such Dividend Payment Date) and all rights with respect to the shares
so called for redemption shall forthwith after such date cease and terminate,
except for the rights of the holders to receive the shares of Common Stock and
funds, if any, payable pursuant to this Paragraph 3 without interest upon
surrender of their certificates therefor (unless the Corporation defaults on
the delivery of such shares or the payment of such funds). Holders of shares
of PRIDES that are redeemed shall not be entitled to receive dividends declared
and paid on such shares of Common Stock, and such shares of Common Stock shall
not be entitled to vote, until such shares of Common Stock are issued upon the
surrender of the certificates representing such shares of PRIDES and upon such
surrender such holders shall be entitled to receive such dividends declared and
paid on such shares of Common Stock subsequent to such redemption date without
interest thereon.
(c) Conversion at Option of Holder. Shares of PRIDES are
convertible, in whole or in part, at the option of the holders thereof, at any
time prior to the Mandatory Conversion Date, unless previously redeemed, into
shares of Common Stock at a rate of .826 of a share of Common Stock for each
share of PRIDES (the "Optional Conversion Rate") (equivalent to a conversion
price of $53.24 per share of Common Stock), subject to adjustment as set forth
below. The right to convert shares of PRIDES called for redemption shall
terminate immediately prior to the close of business on the redemption date.
Conversion of shares of PRIDES at the option of the holder may be
effected by delivering certificates evidencing such shares, together with
written notice of conversion and a proper assignment of such certificates to
the Corporation or in blank, to the office or agency to be maintained by the
Corporation for that purpose (and, if applicable, cash payment of an amount
equal to the dividend payable on such shares), and otherwise in accordance with
conversion procedures established by the Corporation. Each optional conversion
shall be deemed to have been effected immediately prior to the close of
business on the date on which the foregoing requirements shall have been
satisfied. The conversion shall be at the Optional Conversion Rate in effect
at such time and on such date.
Holders of shares of PRIDES at the close of business on a record date
for any payment of declared dividends shall be entitled to receive the dividend
payable on such shares on the corresponding Dividend Payment Date
notwithstanding the conversion of such shares following such record date and
prior to the corresponding Dividend Payment Date. However, shares of PRIDES
surrendered for conversion after the close of business on a record date for any
payment of dividends and before the opening of business on the next succeeding
Dividend Payment Date must be accompanied by payment in cash of an amount equal
to the dividend thereon which is to be paid on such Dividend Payment Date
(unless such shares have been called for redemption on a redemption date
between such record date and such Dividend Payment Date). A holder of shares
of PRIDES called for redemption on July 1, 1998 or any other Dividend Payment
Date thereafter will receive the dividend on such shares payable on that date
and will be able to convert such shares after the record date for such dividend
without paying an amount equal to such dividend to the Corporation upon
conversion. Except as provided above, upon any optional conversion of shares
of PRIDES, the Corporation shall make no payment or allowance for
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<PAGE> 8
unpaid dividends, whether or not in arrears, on converted shares of PRIDES or
for previously declared dividends or distributions on the shares of Common
Stock issued upon such conversion.
(d) Common Equivalent Rate and Optional Conversion Rate Adjustments.
The Common Equivalent Rate and the Optional Conversion Rate shall be each
subject to adjustment from time to time as provided below in this subparagraph
(d).
(i) If the Corporation shall, after June 16, 1995:
(A) pay a stock dividend or make a
distribution with respect to its
Common Stock in shares of such
Common Stock,
(B) subdivide or split its outstanding
Common Stock into a greater number
of shares,
(C) combine its outstanding shares of
Common Stock into a smaller number
of shares, or
(D) issue by reclassification of its
shares of Common Stock any shares of
common stock of the Corporation,
then, in any such event, the Common
Equivalent Rate and the Optional Conversion
Rate in effect immediately prior to such
event shall each be adjusted so that the
holder of any shares of PRIDES shall
thereafter be entitled to receive, upon
Mandatory Conversion or upon conversion at
the option of the holder, the number of
shares of Common Stock of the Corporation
which such holder would have owned or been
entitled to receive immediately following any
event described above had such shares of
PRIDES been converted immediately prior to
such event or any record date with respect
thereto. Such adjustment shall become
effective at the opening of business on the
business day next following the record date
for determination of stockholders entitled to
receive such dividend or distribution, in the
case of a dividend or distribution, and shall
become effective immediately after the
effective date, in the case of a subdivision
split, combination or reclassification. Such
adjustment shall be made successively.
(ii) If the Corporation shall, after June 16,
1995, issue rights (other than Rights issued
pursuant to the Rights Plan (as defined
below)) or warrants to all holders of its
Common Stock entitling them (for a period not
exceeding 45 days from the date of such
issuance) to subscribe for or purchase shares
of Common Stock at a price per share less
than the Current Market Price of the Common
Stock,
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<PAGE> 9
then, in any such event unless such rights or
warrants are issued to holder of shares of
PRIDES on a pro rata basis with the shares of
Common Stock based on the Common Equivalent
Rate on the date immediately preceding such
issuance, the Common Equivalent Rate and
Optional Conversion Rate shall each be
adjusted by multiplying the Common Equivalent
Rate and the Optional Conversion Rate, in
effect immediately prior to the date of
issuance of such rights or warrants, by a
fraction, of which the numerator shall be the
number of shares of Common Stock outstanding
on the date of issuance of such rights or
warrants, immediately prior to such issuance,
plus the number of additional shares of
Common Stock offered for subscription or
purchase pursuant to such rights or warrants,
and of which the denominator shall be the
number of shares of Common Stock outstanding
on the date of issuance of such rights or
warrants, immediately prior to such issuance,
plus the number of additional shares of
Common Stock which the aggregate offering
price of the total number of shares of Common
Stock so offered for subscription or purchase
pursuant to such rights or warrants would
purchase at such Current Market Price
(determined by multiplying such total number
of shares by the exercise price of such
rights or warrants and dividing the product
so obtained by such Current Market Price).
Such adjustment shall become effective at the
opening of business on the business day next
following the record date for the
determination of stockholders entitled to
receive such rights or warrants. To the
extent that shares of Common Stock are not
delivered after the expiration of such rights
or warrants, the Common Equivalent Rate and
the Optional Conversion Rate shall each be
readjusted to the Common Equivalent Rate and
the Optional Conversion Rate which would then
be in effect had the adjustments been made
upon the issuance of such rights or warrants
upon the basis of delivery of only the number
of shares of Common Stock actually delivered.
Such adjustment shall be made successively.
(iii) If the Corporation shall, after June 16,
1995, pay a dividend or make a distribution
to all holders of its Common Stock of
evidences of its indebtedness, cash or other
assets (including capital stock of the
Corporation but excluding any cash dividends
or distributions, other than Extraordinary
Cash Distributions (as hereinafter defined),
and dividends referred to in subparagraph (i)
above) or shall issue to all holders of its
Common Stock rights or warrants to subscribe
for or purchase any of its securities (other
than Rights issued pursuant to the Rights
Plan and those referred to in subparagraph
(ii) above), then unless such dividend is
paid
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<PAGE> 10
or distribution is made to each holder of
shares of PRIDES on a pro rata basis with the
shares of Common Stock based on the Common
Equivalent Rate on the date immediately
preceding such payment or distribution, in
any such event, the Common Equivalent Rate
and the Optional Conversion Rate shall each
be adjusted by multiplying the Common
Equivalent Rate and the Optional Conversion
Rate in effect on the record date mentioned
below, by a fraction of which the numerator
shall be the Current Market Price per share
of the Common Stock on the record date for
the determination of stockholders entitled to
receive such dividend or distribution, and of
which the denominator shall be such Current
Market Price per share of Common Stock less
the fair market value (as determined by the
Board of Directors, whose determination shall
be conclusive, and described in a resolution
adopted with respect thereto) as of such
record date of the portion of the assets or
evidences of indebtedness so distributed or
of such subscription rights or warrants
applicable to one share of Common Stock.
Such adjustment shall become effective on the
opening of business on the business day next
following the record date for the
determination of stockholders entitled to
receive such dividend or distribution. Such
adjustment shall be made successively. As
used in this subparagraph (d), the term
"Extraordinary Cash Distributions" means,
with respect to any cash dividend or
distribution paid on any date, the amount, if
any, by which all cash dividends and cash
distributions on the Common Stock paid during
the consecutive 12-month period ending on and
including such date (other than cash
dividends and cash distributions for which an
adjustment to the Common Equivalent Rate and
the Optional Conversion Rate was previously
made) exceeds, on a per share of Common Stock
basis, 10% of the average of the daily
Closing Prices of the Common Stock over such
consecutive 12-month period.
(iv) Any shares of Common Stock issuable in
payment of a dividend shall be deemed to have
been issued immediately prior to the close of
business on the record date for such dividend
for purposes of calculating the number of
outstanding shares of Common Stock under
subparagraph (ii) above.
(v) The Corporation shall also be entitled to
make upward adjustments in the Common
Equivalent Rate, the Optional Conversion Rate
and the Call Price, as it in its sole
discretion shall determine to be advisable,
in order that any stock dividends,
subdivisions of shares, distribution of
rights to purchase stock or securities, or
distribution of securities convertible into
or exchangeable for stock
- 10 -
<PAGE> 11
(or any transaction which could be treated as
any of the foregoing transactions pursuant to
Section 305 of the Internal Revenue Code of
1986, as amended) made by the Corporation to
its stockholders after June 16, 1995 shall
not be taxable.
(vi) In any case in which subparagraph 3(d) shall
require that an adjustment as a result of any
event become effective at the opening of
business on the business day next following a
record date and the date fixed for conversion
pursuant to subparagraph 3(a) or redemption
pursuant to subparagraph 3(b) occurs after
such record date, but before the occurrence
of such event, the Corporation may, in its
sole discretion, elect to defer the following
until after the occurrence of such event: (A)
issuing to the holder of any converted or
redeemed shares of PRIDES the additional
shares of Common Stock issuable upon such
conversion or redemption over the shares of
Common Stock issuable before giving effect to
such adjustments and (B) paying to such
holder any amount in cash in lieu of a
fractional share of Common Stock pursuant to
subparagraph 3(g).
(vii) All adjustments to the Common Equivalent Rate
and the Optional Conversion Rate shall be
calculated to the nearest 1/100th of a share
of Common Stock. No adjustment in the Common
Equivalent Rate or the Optional Conversion
Rate shall be required unless such adjustment
would require an increase or decrease of at
least one percent therein; provided, however,
that any adjustment which by reason of this
subparagraph (vii) is not required to be made
shall be carried forward and taken into
account in any subsequent adjustment.
(e) Adjustment for Consolidation or Merger. In case of any
consolidation or merger to which the Corporation is a party (other than a
merger or consolidation in which the Corporation is the surviving or continuing
corporation and in which the Common Stock outstanding immediately prior to the
merger or consolidation remains unchanged), or in case of any sale or transfer
to another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in case of any statutory exchange of
securities with another corporation (other than in connection with a merger or
acquisition), proper provision shall be made so that each share of PRIDES
shall, after consummation of such transaction, be subject to (i) conversion at
the option of the holder into the kind and amount of securities, cash or other
property receivable upon consummation of such transaction by a holder of the
number of shares of Common Stock into which such share of PRIDES might have
been converted immediately prior to consummation of such transaction, (ii)
conversion on the Mandatory Conversion Date into the kind and amount of
securities, cash or other property receivable upon consummation of such
transaction by a holder of the number of shares of Common Stock into which such
share of PRIDES would have converted if the conversion on the Mandatory
Conversion Date had occurred immediately prior
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<PAGE> 12
to the date of consummation of such transaction, plus the right to receive cash
in an amount equal to all accrued and unpaid dividends on such shares of PRIDES
(other than previously declared dividends payable to a holder of record as of a
prior date), (iii) redemption on any redemption date in exchange for the kind
and amount of securities, cash or other property receivable upon consummation
of such transaction by a holder of the number of shares of Common Stock that
would have been issuable at the Call Price in effect on such redemption date
upon a redemption of such share immediately prior to consummation of such
transaction, assuming that, if the Notice Date for such redemption is not prior
to such transaction, the Notice Date had been the date of such transaction and
assuming in each case that such holder of Common Stock failed to exercise
rights of election, if any, as to the kind or amount of securities, cash or
other property receivable upon consummation of such transaction (provided that
if the kind or amount of securities, cash or other property receivable upon
consummation of such transaction is not the same for each non-electing share,
then the kind and amount of securities, cash or other property receivable upon
consummation of such transaction for each non-electing share shall be deemed to
be the kind and amount so receivable per share by a plurality of the
non-electing shares). The kind and amount of securities into or for which the
shares of PRIDES shall be convertible or redeemable after consummation of such
transaction shall be subject to adjustment as described in the immediately
preceding paragraph following the date of consummation of such transaction.
The Corporation may not become a party to any such transaction unless the terms
thereof are consistent with the foregoing or consistent with clause (iii) of
Paragraph 7(c).
For purposes of the immediately preceding paragraph and subparagraph
3(g)(iii), any sale or transfer to another corporation of property of the
Corporation which did not account for at least 50% of the consolidated net
income of the Corporation for its most recent fiscal year ending prior to the
consummation of such transaction shall not in any event be deemed to be a sale
or transfer of the property of the Corporation as an entirety or substantially
as an entirety.
(f) Notice of Adjustments. Whenever the Common Equivalent Rate and
Optional Conversion Rate are adjusted as herein provided, the Corporation
shall:
(i) forthwith compute the adjusted Common
Equivalent Rate and Optional Conversion Rate
in accordance herewith and prepare a
certificate signed by an officer of the
Corporation setting forth the adjusted Common
Equivalent Rate and the Optional Conversion
Rate, the method of calculation thereof in
reasonable detail and the facts requiring
such adjustment and upon which such
adjustment is based, which certificate shall
be conclusive, final and binding evidence of
the correctness of the adjustment, and file
such certificate forthwith with the transfer
agent for the shares of PRIDES and the Common
Stock; and
(ii) make a prompt public announcement and mail a
notice to the holders of the outstanding
shares of PRIDES stating that the Common
Equivalent Rate and the Optional Conversion
Rate have
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<PAGE> 13
been adjusted, the facts requiring such
adjustment and upon which such adjustment is
based and setting forth the adjusted Common
Equivalent Rate and Optional Conversion Rate,
such notice to be mailed at or prior to the
time the Corporation mails an interim
statement to its stockholders covering the
fiscal quarter during which the facts
requiring such adjustment occurred, but in
any event within 45 days of the end of such
fiscal quarter.
(g) Notices. In case, at any time while any of the shares of PRIDES
are outstanding,
(i) the Corporation shall declare a dividend (or
any other distribution) on its Common Stock,
excluding any cash dividends; or
(ii) the Corporation shall authorize the issuance
to all holders of its Common Stock of rights
or warrants to subscribe for or purchase
shares of its Common Stock or of any other
subscription rights or warrants; or
(iii) the Corporation shall authorize any
reclassification of its Common Stock (other
than a subdivision or combination thereof)
or of any consolidation or merger to which
the Corporation is a party and for which
approval of any stockholders of the
Corporation is required (except for a merger
of the Corporation into one of its
subsidiaries solely for the purpose of
changing the corporate domicile of the
Corporation to another state of the United
States and in connection with which there is
no substantive change in the rights or
privileges of any securities of the
Corporation other than changes resulting from
differences in the corporate statutes of the
then existing and the new state of domicile),
or of the sale or transfer to another
corporation of the property of the
Corporation as an entirety or substantially
as an entirety; or
(iv) the Corporation shall authorize the voluntary
or involuntary dissolution, liquidation or
winding up of the Corporation;
then the Corporation shall cause to be filed at each office or agency
maintained for the purpose of conversion of the shares of PRIDES, and shall
cause to be mailed to the holders of shares of PRIDES at their last addresses
as they shall appear on the stock register, at least 10 days before the date
hereinafter specified (or the earlier of the dates hereinafter specified, in
the event that more than one date is specified), a notice stating (A) the date
on which a record is to be taken for the purpose of such dividend,
distribution, rights or warrants, or, if a record is not to be taken, the date
as of which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights or warrants are to be determined, or (B) the
date on which any such reclassification, consolidation, merger, sale, transfer,
dissolution, liquidation or winding up is expected to become effective, and the
date as of which it is expected that holders of Common
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<PAGE> 14
Stock of record shall be entitled to exchange their Common Stock for
securities or other property (including cash), if any, deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding up. The failure to give or receive the notice required
by this subparagraph (g) or any defect therein shall not affect the legality or
validity of any such dividend, distribution, right or warrant or other action.
(h) Effect of Conversions and Redemptions. The person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon any conversion or redemption shall be deemed to have
become on the date of any such conversion or redemption the holder or holders
of record of the shares represented thereby; provided, however, that any such
surrender on any date when the stock transfer books of the Corporation shall be
closed shall constitute the person or persons in whose name or names the
certificate or certificates for such shares are to be issued as the record
holder or holders thereof for all purposes at the opening of business on the
next succeeding day on which such stock transfer books are open.
(i) No Fractional Shares. No fractional shares or script
representing fractional shares of Common Stock shall be issued upon the
redemption or conversion of any shares of PRIDES. In lieu of any fractional
share otherwise issuable in respect of the aggregate number of shares of PRIDES
of any holder which are redeemed or converted on any redemption date or upon
Mandatory Conversion or any optional conversion, such holder shall be entitled
to receive an amount in cash (computed to the nearest cent) equal to the same
fraction of the (i) Current Market Price as of the second trading day
immediately preceding the Notice Date, in the case of redemption, or (ii)
Closing Price of the Common Stock determined (A) as of the fifth Trading Date
immediately preceding the Mandatory Conversion Date, in the case of Mandatory
Conversion, or (B) as of the second Trading Date immediately preceding the
effective date of conversion, in the case of an optional conversion by a
holder. If more than one share shall be surrendered for conversion or
redemption at one time by or for the same holder, the number of full shares of
Common Stock issuable upon conversion thereof shall be computed on the basis of
the aggregate number of shares of PRIDES so surrendered or redeemed.
(j) Reissuance. Shares of PRIDES that have been issued and
reacquired in any manner, including shares purchased, exchanged, redeemed or
converted, shall not be reissued as part of PRIDES and shall (upon compliance
with any applicable provisions of the laws of the State of Louisiana) have the
status of authorized and unissued shares of the Preferred Stock undesignated as
to series and may be redesignated and reissued as part of any series of
Preferred Stock.
(k) Definitions. As used in this Section 6:
(i) the term "business day" shall mean any day
other than a Saturday, Sunday, or a day on
which banking institutions in the State of
Louisiana are authorized or obligated by law
or executive order to close or are closed
because of a banking moratorium or otherwise;
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<PAGE> 15
(ii) the term "Call Price" of each share of PRIDES
shall be the sum of (x) $45.188 on and after
July 1, 1998, to and including September 30,
1998, $45.040 on and after October 1, 1998,
to and including December 31, 1998, $44.891
on and after January 1, 1999, to and
including March 31, 1999, $44.743 on and
after April 1, 1999, to and including June
30, 1999, $ 44.594 on and after July 1, 1999,
to and including September 30, 1999, $44.446
on and after October 1, 1999, to and
including December 31, 1999, $44.297 on and
after January 1, 2000, to and including March
31, 2000, $44.149 on and after April 1, 2000,
to and including May 31, 2000, and $44.00 on
and after June 1, 2000, through July 1, 2000
and (y) all accrued and unpaid dividends
thereon to but not including the redemption
date (other than previously declared
dividends payable to a holder of record as of
a prior date);
(iii) the term "Closing Price" on any day shall
mean the last reported sales price on such
day or, in case no such sale takes place on
such day, the average of the reported closing
high and low quotations, in each case on the
Nasdaq National Market, or, if the Common
Stock is not listed on the Nasdaq National
Market, on the principal national securities
exchange on which the Common Stock is listed
or admitted to trading, or, if not listed or
admitted to trading on any national
securities exchange, the average of the high
bid and low-asked quotations of the Common
Stock in the over-the-counter market on the
day in question as reported by the National
Quotation Bureau Incorporated, or a similarly
generally accepted reporting service, or, if
no such quotations are available, the fair
market value of the Common Stock as
determined by any New York Stock Exchange
member firm selected from time to time by the
Board of Directors for such purpose;
(iv) the term "Current Market Price" price per
share of Common Stock at any date shall be
deemed to be the lesser of (x) the average of
the daily Closing Prices for the fifteen
consecutive Trading Dates ending on and
including the date in question or (y) the
Closing Price of the Common Stock for such
date of determination; provided, however, if
any event that results in an adjustment of
the Common Equivalent Rate occurs during such
fifteen-day period, the Current Market Price
as determined pursuant to the foregoing shall
be appropriately adjusted to reflect the
occurrence of such event; and
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<PAGE> 16
(v) the term "Trading Date" shall mean a date on
which the Nasdaq National Market (or any
successor thereto) is open for the
transaction of business.
(l) Payment of Taxes. The Corporation shall pay any and all
documentary, stamp or similar issue or transfer taxes payable in respect of the
issue or delivery of shares of Common Stock on the redemption or conversion of
shares of PRIDES pursuant to this Paragraph 3; provided, however, that the
Corporation shall not be required to pay any tax which may be payable in
respect of any registration of transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the registered holder of
shares of PRIDES redeemed or converted or to be redeemed or converted, and no
such issue or delivery shall be made unless and until the person requesting
such issue has paid to the Corporation the amount of any such tax or has
established, to the satisfaction of the Corporation, that such tax has been
paid.
(m) Reservation of Common Stock. The Corporation shall at all times
reserve and keep available, free from preemptive rights, out of the aggregate
of its authorized but unissued Common Stock and/or its issued Common Stock held
in its treasury, for the purpose of effecting any Mandatory Conversion of the
shares of PRIDES or any conversion of the shares of PRIDES at the option of the
holder, the full number of shares of Common Stock then deliverable upon any
such conversion of all outstanding shares of PRIDES.
(n) Rights. Holders of the PRIDES whose shares of PRIDES are
converted into shares of Common Stock may be entitled to receive Rights (as
defined in that certain Rights Agreement dated as of July 27, 1994 between the
Corporation and Chemical Bank, as Rights Agent, a copy of which along with the
statement of the Corporation pursuant to Section 51C of the Louisiana Business
Corporation Law, was filed in the offices of the Secretary of State of the
State of Louisiana on August 1, 1994 (the "Rights Plan")) in accordance with
the terms and conditions of the Rights Plan. Holders of PRIDES who do not
convert their shares of PRIDES into Common Stock prior to a Distribution Date
(as defined in the Rights Plan) will not receive any Rights and therefore will
not be entitled to participate in the Rights Plan.
PARAGRAPH 4. LIQUIDATION RIGHTS.
(a) In the event of the liquidation, dissolution, or winding up of
the business of the Corporation, whether voluntary or involuntary, the holders
of shares of PRIDES then outstanding, after payment or provision for payment of
the debts and other liabilities of the Corporation and the payment or provision
for payment of any distribution on any shares of the Corporation having a
preference and a priority over the shares of PRIDES on liquidation, and before
any distribution to the holders of Junior Stock, shall be entitled to be paid
out of the assets of the Corporation available for distribution to its
stockholders an amount per share of PRIDES in cash equal to the sum of (i)
$44.00 plus (ii) all accrued and unpaid dividends thereon. In the event the
assets of the Corporation available for distribution to the holders of the
shares of PRIDES upon any dissolution, liquidation or winding up of the
Corporation shall be insufficient to pay in full the liquidation payments
payable to the holders of outstanding shares of PRIDES and of all other series
of Parity Preferred Stock, the holders of shares of PRIDES and of all
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<PAGE> 17
other series of Parity Preferred Stock shall share ratably in such distribution
of assets in proportion to the amount which would be payable on such
distribution if the amounts to which the holders of outstanding shares of
PRIDES and the holders of outstanding shares of such Parity Preferred Stock
were paid in full. Except as provided in this Paragraph 4, holders of PRIDES
shall not be entitled to any distribution in the event of liquidation,
dissolution or winding up of the affairs of the Corporation.
(b) For the purposes of this Paragraph 4, none of the following shall
be deemed to be a voluntary or involuntary liquidation, dissolution or winding
up of the Corporation:
(i) the sale, lease, transfer or exchange of all
or substantially all of the assets of the
Corporation; or
(ii) the consolidation or merger of the
Corporation with one or more other
corporations (whether or not the Corporation
is the corporation surviving such
consolidation or merger).
PARAGRAPH 5. DEFINITION. As used in this Section 6, the term "Common
Stock" shall mean any stock of any class of the Corporation which has no
preference in respect of dividends or of amounts payable in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation and which is not subject to redemption by the Corporation.
However, shares of Common Stock issuable upon conversion of shares of PRIDES
shall include only shares of the class designated as Common Stock as of June
16, 1995, or shares of the Corporation of any class or classes resulting from
any reclassification or reclassification thereof and which have no preference
in respect of dividends or of amounts payable in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the Corporation and which
are not subject to redemption by the Corporation; provided, however, that, if
at any time there shall be more than one such resulting class, the shares of
each such class then so issuable shall be substantially in the proportion which
the total number of shares of such class resulting from such reclassification
bears to the total number of shares of all classes resulting from all such
reclassification.
PARAGRAPH 6. NO PREEMPTIVE RIGHTS. The holders of shares of PRIDES
shall have no preemptive rights, including preemptive rights with respect to
any shares of capital stock or other securities of the Corporation convertible
into or carrying rights or options to purchase any such shares.
PARAGRAPH 7. VOTING RIGHTS.
(a) The holders of shares of PRIDES shall have the right with the
holders of Common Stock to vote in the election of directors and upon each
other matter coming before any meeting of the stockholders on the basis of 4/5
of a vote for each share held. The holders of shares of PRIDES and the holders
of Common Stock shall vote together as one class except as otherwise set forth
herein or as otherwise provided by law or by the Articles of Incorporation of
the Corporation.
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<PAGE> 18
(b) If at any time dividends payable on the shares of PRIDES or any
other series of Preferred Stock are in arrears and unpaid in an aggregate
amount equal to or exceeding the aggregate amount of dividends payable thereon
for six quarterly dividend periods, or if any other series of Preferred Stock
shall be entitled for any other reason to exercise voting rights, separate from
the Common Stock, to elect any Directors of the Corporation ("Preferred Stock
Directors"), the holders of the shares of PRIDES, voting separately as a class
with the holders of all other series of Preferred Stock upon which like voting
rights have been conferred and are exercisable, with each share of PRIDES
entitled to vote on this and other matters upon which Preferred Stock votes us
a group, shall have the right to vote for the election of two Preferred Stock
Directors of the Corporation, such Directors to be in addition to the number of
Directors constituting the Board of Directors immediately prior to the accrual
of such right. Such right of the holders of shares of PRIDES to elect two
Preferred Stock Directors shall, when vested, continue until all dividends in
arrears on the shares of PRIDES and such other series of Preferred Stock shall
have been paid in full and the right of any other series of Preferred Stock to
exercise voting rights, separate from the Common Stock, to elect Preferred
Stock Directors shall terminate or have terminated and, when so paid, and any
such termination occurs or has occurred, such right of the holders of shares of
PRIDES to elect two Preferred Stock Directors separately as a class shall
cease, subject always to the same provisions for the vesting of such right of
the holders of the shares of PRIDES to elect two Preferred Stock Directors in
the case of future dividend defaults.
The term of office of each Director elected pursuant to the preceding
paragraph shall terminate on the earlier of (i) the next annual meeting of
stockholders at which a successor shall have been elected and qualified or (ii)
the termination of the right of the holders of shares of PRIDES and such other
series of Preferred Stock to vote for Directors pursuant to the preceding
paragraph. Vacancies on the Board of Directors resulting from the death,
resignation or other cause of any such Director shall be filled exclusively by
no less than two-thirds of the remaining Directors and the Director so elected
shall hold office until a successor is elected and qualified.
(c) For as long as any shares of PRIDES remain outstanding, the
affirmative consent of the holders of at least two-thirds thereof actually
voting (voting separately as a class) given in person or by proxy, at any
annual meeting or special meeting of the shareholders called for such purpose,
shall be necessary to (i) amend, alter or repeal any of the provisions of the
Articles of Incorporation of the Corporation which would adversely affect the
powers, preferences or rights of the holders of the shares of PRIDES then
outstanding or reduce the minimum time required for any notice to which holders
of shares of PRIDES then outstanding may be entitled; provided, however, that
any such amendment, alteration or repeal that would authorize, create or
increase the authorized amount of any additional shares of Junior Stock or any
other shares of stock (whether or not already authorized) ranking on a parity
with the shares of PRIDES shall be deemed not to adversely affect such powers,
preferences or rights and shall not be subject to approval by the holders of
shares of PRIDES; and provided further that clause (i) shall not be applicable
to the amendment, alteration or repeal of any provisions of the Articles of
Incorporation of the Corporation approved at a meeting of the shareholders the
record date of which is prior to the issuance of any shares of PRIDES; (ii)
authorize or create, or increase the authorized amount of, any capital stock,
or any security convertible into capital stock, of any
- 18 -
<PAGE> 19
class ranking senior to PRIDES as to payment of dividends or the distribution
of assets upon liquidation, dissolution or winding up of the Corporation; or
(iii) merge or consolidate with or into any other corporation, unless each
holder of the shares of PRIDES immediately preceding such merger or
consolidation shall have the right either to (A) receive or continue to hold in
the resulting corporation the same number of shares, with substantially the
same rights and preferences, as correspond to the shares of PRIDES so held or
(B) convert into shares of Common Stock at the Common Equivalent Rate in effect
on the date immediately preceding the announcement of any such merger or
consolidation.
There is no limitation on the issuance by the Corporation of Parity
Preferred Stock or of any class ranking junior to the shares of PRIDES.
Notwithstanding the provisions summarized in the preceding two
paragraphs, however, no such approval described therein of the holders of the
shares of PRIDES shall be required to authorize an increase in the number of
authorized shares of Preferred Stock or if, at or prior to the time when such
amendment, alteration, or repeal is to take effect or when the authorization,
creation or increase of any such senior stock or security is to be made, or
when such consolidation or merger, liquidation, dissolution or winding up is to
take effect, as the case may be, provision is made for the redemption of all
shares of PRIDES at the time outstanding."
Executed this 13th day of June, 1995, by the undersigned officers
of the Corporation in the presence of the undersigned competent witnesses.
WITNESSES: UNITED COMPANIES
FINANCIAL CORPORATION
______________________________ By: /s/ J. TERRELL BROWN
_____________________________________
J. Terrell Brown
Chief Executive Officer and President
______________________________
By: /s/ SHERRY E. ANDERSON
__________________________________
Sherry E. Anderson, Secretary
- 19 -
<PAGE> 20
STATE OF LOUISIANA
PARISH OF EAST BATON ROUGE
I, Lee C. Kantrow, a Notary Public duly qualified and commissioned
in and for the Parish and State aforesaid, do hereby certify that on
this 13th day of June, 1995, personally appeared before me J. Terrell Brown
and Sherry E. Anderson, who, being by me first duly sworn, declared and
acknowledged that they are the Chief Executive Officer and President and
Secretary, respectively, of United Companies Financial Corporation, that they
signed the foregoing document as Chief Executive Officer and President and
Secretary, respectively, of that Corporation and the statements contained
therein are true.
/s/ Lee C. Kantrow
-----------------------------
Notary Public
- 20 -
<PAGE> 1
EXHIBIT 5.1
June 19, 1995
United Companies Financial Corporation
4041 Essen Lane
Baton Rouge, Louisiana 70809
Re: United Companies Financial Corporation
Registration Statement on Form S-3
Gentlemen:
We have acted as special counsel for United Companies Financial Corporation, a
Louisiana corporation (the "Company"), in connection with the registration by
the Company of (A) up to $200,000,000 aggregate initial offering price of its
(i) unsecured debt securities (the "Debt Securities"), which may be either
senior or subordinated and (ii) shares of its preferred stock, par value $2.00
per share (the "Preferred Stock" and together with the Debt Securities, the
"Securities") and (B) an indeterminate number of shares of its common stock,
par value $2.00 per share, and associated preferred share purchase rights and
Debt Securities that may be issued upon conversion or exchange of Securities as
set forth in the Registration Statement on Form S-3 (the "Registration
Statement") that is being filed with the Securities and Exchange Commission
(the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"). We may also act as special counsel to the Company in
connection with the possible future registration of up to $40,000,000 aggregate
initial offering price of Securities that may be registered pursuant to Rule
462(b) under the Securities Act by means of an additional registration
statement relating to the Registration Statement (any such additional
registration statement, the "462(b) Registration Statement").
The Securities are to be issued, separately or together, in one or more series
and are to be sold from time to time as set forth in the Registration
Statement, the prospectus contained therein
<PAGE> 2
United Companies Financial Corporation
June 19, 1995
Page 2
and any amendments or supplements thereto and the 462(b) Registration
Statement, if any.
The senior Debt Securities and the subordinated Debt Securities are to be
issued pursuant to separate Indentures (each, an "Indenture") between the
Company and The First National Bank of Chicago, as trustee, and State Street
Bank and Trust Company, as trustee, respectively (each, a "Trustee"). Certain
of the terms of each series of Debt Securities may be set forth in a
supplemental indenture to an Indenture (each, a "Supplemental Indenture")
between the Company and a Trustee.
Attorneys involved in the preparation of this opinion are admitted to practice
law in the State of New York and we do not express any opinion herein
concerning, any law other than the laws of the State of New York and the laws
of the United States of America.
We have examined copies of the articles of incorporation, as amended, and
by-laws of the Company, forms of the Indentures and forms of the Debt
Securities included therein, as well as the Registration Statement and forms of
the agreements and other documents filed or to be filed as exhibits thereto.
We also have examined the original or reproduced or certified copies of all
such records of the Company, all such agreements, certificates of officers and
representatives of the Company and others, and such other documents, papers,
statutes and authorities as we deemed necessary to form the basis of the
opinions hereinafter expressed. In such examinations, we have assumed the
genuineness of all signatures, the authenticity of all documents submitted to
us as originals and the conformity to original documents of copies of documents
supplied to us by the Company and others. As to certain matters of fact
relevant to the opinions hereinafter expressed, we have relied upon statements
and certificates of officers of the Company and others.
Based upon the foregoing, we are of the opinion that when the issuance,
execution and delivery of each series of Debt Securities (including any Debt
Securities issued pursuant to the 462(b) Registration Statement, if any) has
been authorized by all necessary corporate action of the Company (subject to
the terms thereof being otherwise in compliance with applicable law at such
time) and otherwise in accordance with the provisions of the applicable
Indenture and related Supplemental Indenture, if any, and when such Debt
Securities have been duly executed, authenticated and delivered by the
applicable Trustee and sold as
<PAGE> 3
United Companies Financial Corporation
June 19, 1995
Page 3
described in the Registration Statement, (a) such Debt Securities will
constitute valid and binding obligations of the Company, enforceable in
accordance with their terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or affecting
creditors' rights generally and court decisions with respect thereto, except
that we express no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity, and (b) the holders
of such Debt Securities will be entitled to the benefits provided by the
applicable Indenture and related Supplemental Indenture, if any.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement, to the incorporation by reference of this opinion in
any 462(b) Registration Statement, to the reference to us in the prospectus and
each related prospectus supplement forming a part of the Registration
Statement, and to the filing of this opinion as an exhibit to any application
made by or on behalf of the Company or any dealer in connection with the
registration of the Securities under the securities or blue sky laws of any
state or jurisdiction. In giving such permission, we do not admit hereby that
we come within the category of persons whose consent is required under Section
7 of the Securities Act or the rules and regulations of the Commission
thereunder.
Very truly yours,
/s/ STROOCK & STROOCK & LAVAN
<PAGE> 1
Exhibit 5.2
June 19, 1995
United Companies Financial Corporation
4041 Essen Lane
P.O. Box 1591
Baton Rouge, Louisiana 70821-1591
Re: United Companies Financial Corporation - Registration
Statement on Form S-3
Ladies and Gentlemen:
We have acted as counsel to United Companies Financial Corporation
(the "Company") in connection with the preparation of the Registration
Statement on Form S-3 (the "Registration Statement") filed on June 19, 1995
with the Securities and Exchange Commission under the Securities Act of 1933,
as amended (the "Act"), covering up to $200,000,000 aggregate initial offering
price of (i) the Company's unsecured debt securities, which may be either
senior or subordinated (the "Debt Securities"); and (ii) the Company's $2.00
par value preferred stock (the "Preferred Stock") (the Debt Securities and the
Preferred Stock are collectively referred to herein as the "Securities"). The
Registration Statement also covers an indeterminate number of shares of the
Company's $2.00 par value common stock, including associated rights to purchase
the Company's Series A Junior Participating Preferred Stock (together, the
"Common Stock") as may be issued upon conversion or exchange of the Debt
Securities or the Preferred Stock, as the case may be. We may also act as
counsel to the Company in connection with the possible future registration of
up to $40,000,000 aggregate initial offering price of Securities that may be
registered pursuant to Rule 462(b) under the Act by means of an additional
registration statement relating to the Registration Statement (any such
additional registration statement, the "462(b) Registration Statement"). The
Securities are to be issued, separately or together, in one or more series and
are to be sold from time to time as set forth in the Registration Statement,
the prospectus contained therein and any amendment or supplements thereto and
the 462(b) Registration Statement, if any.
The senior Debt Securities and the subordinated Debt Securities are to
be issued pursuant to separate Indentures (each, an "Indenture") between the
Company and The First National Bank of Chicago, as trustee, and State Street
Bank and Trust Company, as trustee, respectively (each,
<PAGE> 2
United Companies Financial Corporation
June 19, 1995
Page 2
a "Trustee"). Certain of the terms of each series of Debt Securities may be
set forth in a supplemental indenture to an Indenture between the Company and a
Trustee.
We have examined the originals, or copies certified or otherwise
identified to our satisfaction, of the Company's Articles of Incorporation, as
amended, its By-Laws, as amended, resolutions of its Board of Directors, and
such other documents and corporate records as we have deemed necessary as the
basis for the opinion expressed herein. Based upon the foregoing and in
reliance thereon, and after examination of such matters of law as we deem
applicable or relevant hereto, it is our opinion that:
(1) The Company is duly incorporated under the laws of the State
of Louisiana and is validly existing and in good standing
under the laws of that State;
(2) When (i) the Registration Statement (including the 462(b)
Registration Statement, if any) has become effective under the
Act and under all state securities laws where registration or
qualification is required; (ii) the Underwriting Agreement -
Basic Provisions and the related Terms Agreement have been
duly authorized, executed and delivered by the Company; (iii)
the designation of one or more series of Preferred Stock and
the establishment of the relevant rights, preferences,
limitations and qualifications of such series has been duly
authorized by the Company; (iv) the issuance and sale of
shares of the Preferred Stock and the terms of the offering
have been duly authorized by the Company; (v) the issuance and
sale of shares of the Preferred Stock are in conformity with
the Registration Statement (including the 462(b) Registration
Statement, if any) and the prospectus made a part thereof, as
supplemented from time to time, that may be filed or in effect
from time to time, the Louisiana Business Corporation Law as
then in effect (the "LBCL"), and the Company's Articles of
Incorporation, as amended, and do not violate any applicable
law, order, rule or regulation or any document, agreement or
instrument then binding on the Company; and (vi) the form of
certificates representing shares of the Preferred Stock
complies with the requirements of the LBCL, the Preferred
Stock, when issued against payment therefor, will be validly
issued, fully paid and non-assessable.
(3) If any of the Securities to be issued are convertible or
exchangeable into shares of Common Stock, when (i) the
Registration Statement (including the 462(b) Registration
Statement, if any) has become effective under the
<PAGE> 3
United Companies Financial Corporation
June 19, 1995
Page 3
Act and under all state securities laws where registration or
qualification is required; (ii) the Debt Securities or
Preferred Stock have been exchanged or converted into shares
of Common Stock pursuant to due authorization of the Company's
Board of Directors; (iii) the exchange or conversion of the
Debt Securities or Preferred Stock into shares of Common Stock
complies in all respects with the terms of the Debt Securities
or Preferred Stock, the Common Stock when issued upon exchange
or conversion of the Debt Securities or Preferred Stock, will
be validly issued, fully paid and non-assessable.
We hereby expressly consent to the reference to our firm in the
prospectus and each related prospectus supplement forming a part of the
Registration Statement, to the inclusion of this opinion as an exhibit to the
Registration Statement, to the incorporation by reference of this opinion in
the 462(b) Registration Statement, if any, and to the filing of this opinion
with any appropriate governmental agency.
Very truly yours,
KANTROW, SPAHT, WEAVER & BLITZER
(A PROFESSIONAL LAW CORPORATION)
/s/ KANTROW, SPAHT, WEAVER & BLITZER
(A PROFESSIONAL LAW CORPORATION)
<PAGE> 1
EXHIBIT 15.1
June 19, 1995
United Companies Financial Corporation
4041 Essen Lane
Baton Rouge, Louisiana
We have made a review, in accordance with standards established by the American
Institute of Certified Public Accountants, of the unaudited interim
consolidated financial information of United Companies Financial Corporation
and subsidiaries for the periods ended March 31, 1995 and 1994, as indicated in
our report dated May 12, 1995; because we did not perform an audit, we
expressed no opinion on that information.
We are aware that the report referred to above, which was included in your
Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, is being
used in this Registration Statement.
We also are aware that the aforementioned report, pursuant to Rule 436(c) under
the Securities Act of 1933, is not considered a part of the Registration
Statement prepared or certified by an accountant or a report prepared or
certified by an accountant within the meaning of Sections 7 and 11 of that Act.
/s/ Deloitte & Touche LLP
<PAGE> 1
EXHIBIT 23.3
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Registration Statement of
United Companies Financial Corporation on Form S-3 of our report dated February
28, 1995 (May 1 as to Note 13 and Item 14, Schedules V and VI) (which expresses
an unqualified opinion and includes an explanatory paragraph relating to the
Company's plan to dispose of United General Title Insurance Company, a
wholly-owned subsidiary of the Company), appearing in and incorporated by
reference in the Annual Report on Form 10-K/A-1 of United Companies Financial
Corporation for the year ended December 31, 1994, and to the reference to us
under the headings "Selected Financial and Other Data" and "Experts" in the
Prospectus, which is part of this Registration Statement.
/s/ Deloitte & Touche LLP
Baton Rouge, Louisiana
June 19, 1995
<PAGE> 1
EXHIBIT 25.1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) _____
_________________________________
THE FIRST NATIONAL BANK OF CHICAGO
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
A NATIONAL BANKING ASSOCIATION 36-0899825
(I.R.S. EMPLOYER
IDENTIFICATION NUMBER)
ONE FIRST NATIONAL PLAZA, CHICAGO, ILLINOIS 60670-0126
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
THE FIRST NATIONAL BANK OF CHICAGO
ONE FIRST NATIONAL PLAZA, SUITE 0286
CHICAGO, ILLINOIS 60670-0286
ATTN: LYNN A. GOLDSTEIN, LAW DEPARTMENT (312) 732-6919
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
___________________________________
UNITED COMPANIES FINANCIAL CORPORATION
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
LOUISIANA 71-0430414
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
4041 ESSEN LANE
BATON ROUGE, LOUISIANA 70809
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
SENIOR DEBT SECURITIES
(TITLE OF INDENTURE SECURITIES)
<PAGE> 2
ITEM 1. GENERAL INFORMATION. FURNISH THE FOLLOWING
INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR
SUPERVISING AUTHORITY TO WHICH IT IS SUBJECT.
Comptroller of Currency, Washington, D.C.,
Federal Deposit Insurance Corporation,
Washington, D.C., The Board of Governors of
the Federal Reserve System, Washington D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE
CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate
trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR
IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH
SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A
PART OF THIS STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the
trustee now in effect.*
2. A copy of the certificates of authority of the
trustee to commence business.*
3. A copy of the authorization of the trustee to
exercise corporate trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not Applicable.
6. The consent of the trustee required by
Section 321(b) of the Act.
2
<PAGE> 3
7. A copy of the latest report of condition of the
trustee published pursuant to law or the
requirements of its supervising or examining
authority.
8. Not Applicable.
9. Not Applicable.
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, The First National Bank of Chicago, a national
banking association organized and existing under the laws of the
United States of America, has duly caused this Statement of
Eligibility to be signed on its behalf by the undersigned, thereunto
duly authorized, all in the City of Chicago and State of Illinois, on
the 14th day of June,1995.
THE FIRST NATIONAL BANK OF CHICAGO,
TRUSTEE,
BY /S/ STEVEN M. WAGNER
STEVEN M. WAGNER, VICE PRESIDENT
* Exhibit 1,2,3 and 4 are herein incorporated by reference to Exhibits bearing
identical numbers in Item 12 of the Form T-1 of The First National Bank of
Chicago, filed as Exhibit 26 to the Registration Statement on Form S-3 of The
CIT Group Holdings, Inc., filed with the Securities and Exchange Commission on
February 16, 1993 (Registration No. 33-58418).
3
<PAGE> 4
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED BY
SECTION 321(b) OF THE ACT
June 14, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an indenture between United Companies
Financial Corporation and The First National Bank of Chicago, the undersigned,
in accordance with Section 321(b) of the Trust Indenture Act of 1939, as
amended, hereby consents that the reports of examinations of the undersigned,
made by Federal or State authorities authorized to make such examinations, may
be furnished by such authorities to the Securities and Exchange Commission upon
its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
BY: /S/ STEVEN M. WAGNER
STEVEN M. WAGNER, VICE PRESIDENT
4
<PAGE> 5
EXHIBIT 7
<TABLE>
<CAPTION>
<S> <C> <C>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
SCHEDULE RC--BALANCE SHEET
C400 (-
DOLLAR AMOUNTS IN ------------ -----
THOUSANDS RCFD BIL MIL THOU
------------------ ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1) . . . . . . . 0081 2,948,128
b. Interest-bearing balances(2) . . . . . . . . . . . . . . . . . . . . 0071 8,482,108 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A) 1754 167,911 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D) . . . . 1773 540,011 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold . . . . . . . . . . . . . . . . . . . . . . . . . 0276 2,508,883 3.a.
b. Securities purchased under agreements to resell . . . . . . . . . . 0277 1,422,695 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . RCFD 2122 16,238,310 4.a.
b. LESS: Allowance for loan and lease losses . . . . . . . . . . . . . RCFD 3123 358,207 4.b.
c. LESS: Allocated transfer risk reserve . . . . . . . . . . . . . . . RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c) . . . . . . . . . . . . . . . . 2125 15,880,103 4.d.
5. Assets held in trading accounts . . . . . . . . . . . . . . . . . . . . 3545 13,257,798 5.
6. Premises and fixed assets (including capitalized leases) . . . . . . . 2145 516,827 6.
7. Other real estate owned (from Schedule RC-M) . . . . . . . . . . . . . 2150 13,166 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M) . . . . . . . . . . . . . . . . . . . . 2130 10,363 8.
9. Customers' liability to this bank on acceptances outstanding . . . . . 2155 463,961 9.
10. Intangible assets (from Schedule RC-M) . . . . . . . . . . . . . . . . 2143 119,715 10.
11. Other assets (from Schedule RC-F) . . . . . . . . . . . . . . . . . . 2160 1,346,941 11.
12. Total assets (sum of items 1 through 11) . . . . . . . . . . . . . . . 2170 47,678,610 12.
</TABLE>
__________________
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
5
<PAGE> 6
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
Thousands BIL MIL THOU
---------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1) . . . . . . . . . . . RCON 2200 14,675,401 13.a.
(1) Noninterest-bearing(1) . . . . . . . . . . . . RCON 6631 5,498,690 13.a.(1)
(2) Interest-bearing . . . . . . . . . . . . . . . RCON 6636 9,176,711 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II) . . . . . . . . RCFN 2200 11,809,645 13.b.
(1) Noninterest bearing . . . . . . . . . . . . . RCFN 6631 304,669 13.b.(1)
(2) Interest-bearing RCFN 6636 11,504,976 13.b.(2)
14. Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased . . . . . . . . . . . . . RCFD 0278 2,072,830 14.a.
b. Securities sold under agreements to repurchase . . RCFD 0279 1,484,164 14.b.
15.a. Demand notes issued to the U.S. Treasury . . . . . RCON 2840 103,138 15.a.
b. Trading Liabilities................................................. RCFD 3548 9,101,186 15.b.
16.Other borrowed money:
a. With original maturity of one year or less . . . . RCFD 2332 2,307,860 16.a.
b. With original maturity of more than one year . . RCFD 2333 506,476 16.b.
17.Mortgage indebtedness and obligations under capitalized
leases . . . . . . . . . . . . . . . . . . . . . . . RCFD 2910 278,108 17.
18.Bank's liability on acceptance executed and outstanding RCFD 2920 463,961 18.
19.Subordinated notes and debentures . . . . . . . . . . RCFD 3200 1,225,000 19.
20.Other liabilities (from Schedule RC-G) . . . . . . . . RCFD 2930 699,375 20.
21.Total liabilities (sum of items 13 through 20) . . . . RCFD 2948 44,727,144 21.
22.Limited-Life preferred stock and related surplus . . . RCFD 3282 0 22.
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus . . . . RCFD 3838 0 23.
24.Common stock . . . . . . . . . . . . . . . . . . . . . RCFD 3230 200,858 24.
25.Surplus (exclude all surplus related to preferred
stock) . . . . . . . . . . . . . . . . . . . . . . . . RCFD 3839 2,304,657 25.
26.a. Undivided profits and capital reserves . . . . . . RCFD 3632 447,916 26.a.
b. Net unrealized holding gains (losses) on available-for-sale
securities . . . . . . . . . . . . . . . . . . . . RCFD 8434 [ 2,165) 26.b.
27.Cumulative foreign currency translation adjustments . RCFD 3284 200 27.
28.Total equity capital (sum of items 23 through 27) . . RCFD 3210 2,951,466 28.
29.Total liabilities, limited-life preferred stock,
and equity capital (sum of items 21, 22, and 28). . RCFD 3300 47,678,610 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that
best describes the most comprehensive level of auditing work performed for
the bank by independent external Number
auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . RCFD 6724 N/A M.1.
</TABLE>
<TABLE>
<S> <C>
1 = Independent audit of the bank conducted in accordance 4 = Directors' examination of the bank performed by other
with generally accepted auditing standards by a certified external auditors (may be required by state chartering
public accounting firm which submits a report on the bank authority)
2 = Independent audit of the bank's parent holding company 5 = Review of the bank's financial statements by external
conducted in accordance with generally accepted auditing auditors
standards by a certified public accounting firm which 6 = Compilation of the bank's financial statements by external
submits a report on the consolidated holding company auditors
(but not on the bank separately) 7 = Other audit procedures (excluding tax preparation work)
3 = Directors' examination of the bank conducted in 8 = No external audit work
accordance with generally accepted auditing standards
by a certified public accounting firm (may be required by
state chartering authority)
</TABLE>
___________________
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
6
<PAGE> 1
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM T-1
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
Check if an Application to Determine Eligibility
of a Trustee Pursuant to Section 305(b)(2)____
STATE STREET BANK AND TRUST COMPANY
(Exact name of trustee as specified in its charter)
Massachusetts 04-1867445
(Jurisdiction of incorporation or (I.R.S. Employer
organization if not a U.S. national bank) Identification No.)
225 Franklin Street, Boston, Massachusetts 02110
(Address of principal executive offices) (Zip code)
John R. Towers, Senior Vice President or:
Robert J. Malley, Esq. General Counsel and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617) 654-3253
(Name, address and telephone number of agent for service)
____________________
UNITED COMPANIES FINANCIAL CORPORATION
(Exact name of obligor as specified in its charter)
Louisiana 71-0430414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4041 Essen Lane
Baton Rouge, Louisiana 70809
(Address of principal executive offices) (Zip code)
______________________
Debt Securities
(Title of indenture securities)
<PAGE> 2
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System, Washington,
D.C., Federal Deposit Insurance Corporation, Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its parent,
State Street Boston Corporation.
(See Note on page 6.)
ITEM 3. VOTING SECURITIES OF THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF VOTING SECURITIES OF
THE TRUSTEE:
As of: June 14, 1995
Col. A Col. B
Title of Class Amount outstanding
Not applicable.
ITEM 4. TRUSTEESHIPS UNDER OTHER INDENTURES.
IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY OTHER
SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, FURNISH THE FOLLOWING INFORMATION:
(A) TITLE OF THE SECURITIES OUTSTANDING UNDER EACH SUCH OTHER INDENTURE.
Not applicable.
(B) A BRIEF STATEMENT OF THE FACTS RELIED UPON AS A BASIS FOR THE CLAIM
THAT NO CONFLICTING INTEREST WITHIN THE MEANING OF SECTION 310(B)(1) OF THE ACT
ARISES AS A RESULT OF THE TRUSTEESHIP UNDER ANY SUCH OTHER INDENTURE, INCLUDING
A STATEMENT AS TO HOW THE INDENTURE SECURITIES WILL RANK AS COMPARED WITH THE
SECURITIES ISSUED UNDER SUCH OTHER INDENTURE.
Not applicable.
40713215
1
<PAGE> 3
ITEM 5. INTERLOCKING DIRECTORATES AND SIMILAR RELATIONSHIPS WITH THE
OBLIGOR OR UNDERWRITERS.
IF THE TRUSTEE OR ANY OF THE DIRECTORS OR EXECUTIVE OFFICERS OF THE
TRUSTEE IS A DIRECTOR, OFFICER, PARTNER, EMPLOYEE, APPOINTEE OR REPRESENTATIVE
OF THE OBLIGOR OR OF ANY UNDERWRITER FOR THE OBLIGOR, IDENTIFY EACH SUCH PERSON
HAVING ANY SUCH CONNECTION AND STATE THE NATURE OF EACH SUCH CONNECTION.
Not applicable.
ITEM 6. VOTING SECURITIES OF THE TRUSTEE OWNED BY THE OBLIGOR OR ITS
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY THE OBLIGOR AND EACH DIRECTOR, PARTNER AND
EXECUTIVE OFFICER OF THE OBLIGOR:
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Name of Title of Amount owned Percentage of
owner class beneficially voting securities
represented by
amount given in
Col. C
Not applicable.
ITEM 7. VOTING SECURITIES OF THE TRUSTEE OWNED BY UNDERWRITERS OR THEIR
OFFICIALS.
FURNISH THE FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF THE
TRUSTEE OWNED BENEFICIALLY BY EACH UNDERWRITER FOR THE OBLIGOR AND EACH
DIRECTOR, PARTNER AND EXECUTIVE OFFICER OF EACH SUCH UNDERWRITER:
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Name of Title of Amount owned Percentage of
owner class beneficially voting securities
represented by
amount given in
Col. C
Not applicable.
ITEM 8. SECURITIES OF THE OBLIGOR OWNED OR HELD BY THE TRUSTEE.
FURNISH THE FOLLOWING INFORMATION AS TO SECURITIES OF THE OBLIGOR OWNED
BENEFICIALLY OR HELD AS COLLATERAL SECURITY FOR OBLIGATIONS IN DEFAULT BY THE
TRUSTEE:
2
<PAGE> 4
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Title of Whether Amount owned Percent of
class the securities beneficially class repre-
are voting or or held as sented by
non-voting collateral security amount given
securities for obligations in Col. C
in default
Not applicable.
ITEM 9. SECURITIES OF UNDERWRITERS OWNED OR HELD BY THE TRUSTEE.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF AN UNDERWRITER FOR THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH
UNDERWRITER ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 10. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF VOTING SECURITIES OF
CERTAIN AFFILIATES OR SECURITY HOLDERS OF THE OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT VOTING SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF
THE TRUSTEE (1) OWNS 10 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR
OR (2) IS AN AFFILIATE, OTHER THAN A SUBSIDIARY, OF THE OBLIGOR, FURNISH THE
FOLLOWING INFORMATION AS TO THE VOTING SECURITIES OF SUCH PERSON:
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 11. OWNERSHIP OR HOLDINGS BY THE TRUSTEE OF ANY SECURITIES OF A
PERSON OWNING 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE
OBLIGOR.
IF THE TRUSTEE OWNS BENEFICIALLY OR HOLDS AS COLLATERAL SECURITY FOR
OBLIGATIONS IN DEFAULT ANY SECURITIES OF A PERSON WHO, TO THE KNOWLEDGE OF THE
TRUSTEE, OWNS 50 PERCENT OR MORE OF THE VOTING SECURITIES OF THE OBLIGOR,
FURNISH THE FOLLOWING INFORMATION AS TO EACH CLASS OF SECURITIES OF SUCH PERSON
ANY OF WHICH ARE SO OWNED OR HELD BY THE TRUSTEE:
3
<PAGE> 5
As of: June 14, 1995
Col. A Col. B Col. C Col. D
Title of Amount Amount owned Percent of
issuer outstanding beneficially class represented
and title or held as by amount
of class collateral security given in Col. C
for obligations in
default by trustee
Not applicable.
ITEM 12. INDEBTEDNESS OF THE OBLIGOR TO THE TRUSTEE.
EXCEPT AS NOTED IN THE INSTRUCTIONS, IF THE OBLIGOR IS INDEBTED TO THE
TRUSTEE, FURNISH THE FOLLOWING INFORMATION:
As of: June 14, 1995
Col. A Col. B Col. C
Nature of Amount Date due
indebtedness outstanding
Not applicable.
ITEM 13. DEFAULTS BY THE OBLIGOR.
(A) STATE WHETHER THERE IS OR HAS BEEN A DEFAULT WITH RESPECT TO THE
SECURITIES UNDER THIS INDENTURE. EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
Not applicable.
(B) IF THE TRUSTEE IS A TRUSTEE UNDER ANOTHER INDENTURE UNDER WHICH ANY
OTHER SECURITIES, OR CERTIFICATES OF INTEREST OR PARTICIPATION IN ANY OTHER
SECURITIES, OF THE OBLIGOR ARE OUTSTANDING, OR IS A TRUSTEE FOR MORE THAN ONE
OUTSTANDING SERIES OF SECURITIES UNDER THE INDENTURE, STATE WHETHER THERE HAS
BEEN A DEFAULT UNDER ANY SUCH INDENTURE OR SERIES, IDENTIFY THE INDENTURE OR
SERIES AFFECTED, AND EXPLAIN THE NATURE OF ANY SUCH DEFAULT.
Not applicable.
ITEM 14. AFFILIATIONS WITH THE UNDERWRITERS.
IF AN UNDERWRITER IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
Not applicable.
ITEM 15. FOREIGN TRUSTEE.
IDENTIFY THE ORDER OR RULE PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
4
<PAGE> 6
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS STATEMENT OF ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN EFFECT.
A copy of the Articles of Association of the trustee, as now in
effect, is on file with the Securities and Exchange Commission as
Exhibit 1 to Amendment No. 1 to the Statement of Eligibility and
Qualification of Trustee (Form T-1) filed with Registration
Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the trustee to
commence business was necessary or issued is on file with the
Securities and Exchange Commission as Exhibit 2 to Amendment No.
1 to the Statement of Eligibility and Qualification of Trustee
(Form T-1) filed with Registration Statement of Morse Shoe, Inc.
(File No. 22-17940) and is incorporated herein by reference
thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE TRUST
POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS SPECIFIED IN
PARAGRAPH (1) OR (2) ABOVE.
A copy of the authorization of the trustee to exercise corporate
trust powers is on file with the Securities and Exchange
Commission as Exhibit 3 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with
Registration Statement of Morse Shoe, Inc. (File No. 22-17940)
and is incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the By-Laws of the trustee, as now in effect, is on
file with the Securities and Exchange Commission as Exhibit 4 to
the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with Registration Statement of Eastern Edison Company
(File No. 33-37823) and is incorporated herein by reference
thereto.
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4, IF THE OBLIGOR IS IN
DEFAULT.
Not applicable.
6. THE CONSENTS OF THE UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the Act
is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING AUTHORITY.
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a
part hereof.
5
<PAGE> 7
8. A COPY OF ANY ORDER PURSUANT TO WHICH THE FOREIGN TRUSTEE IS
AUTHORIZED TO ACT AS SOLE TRUSTEE UNDER INDENTURES QUALIFIED OR TO BE QUALIFIED
UNDER THE ACT.
Not applicable.
9. FOREIGN TRUSTEES ARE REQUIRED TO FURNISH A CONSENT TO SERVICE OF
PROCESS.
Not applicable.
NOTE
The answers to this statement insofar as such answers relate to persons
who are affiliates of the obligors are based upon information furnished to the
trustee by the obligors. While the trustee has no reason to doubt the accuracy
of any such information, it cannot accept any responsibility therefor.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
trustee, State Street Bank and Trust Company, a corporation organized and
existing under the laws of The Commonwealth of Massachusetts, has duly caused
this statement of eligibility to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Boston and The Commonwealth of
Massachusetts, on the 14th day of June, 1995.
STATE STREET BANK AND TRUST COMPANY
By /s/ Daniel Golden
Daniel Golden
Assistant Vice President
6
<PAGE> 8
EXHIBIT 6
CONSENT OF TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, in connection with the proposed issuance by United Companies Financial
Corporation of its Debt Securities, we hereby consent that reports of
examination by Federal, State, Territorial or District authorities may be
furnished by such authorities to the Securities and Exchange Commission upon
request therefor.
STATE STREET BANK AND TRUST COMPANY
By /s/ Daniel Golden
Daniel Golden
Assistant Vice President
Dated: June 14, 1995
7
<PAGE> 9
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business December
31, 1994, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
<TABLE>
<CAPTION>
Thousands Of
Dollars
-------
<S> <C>
ASSETS
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin . . . . . . . 942,661
Interest-bearing balances . . . . . . . . . . . . . . . . . . . . . . 4,843,628
Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8,410,339
Federal funds sold and securities purchased under agreements
to resell in domestic offices of the bank and of its Edge
subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,240,374
Loans and lease financing receivables:
Loans and leases, net of unearned income . . . . . . 3,257,795
Allowance for loan and lease losses . . . . . . . . . 58,184
Loans and leases, net of unearned income and
allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,199,611
Assets held in trading accounts . . . . . . . . . . . . . . . . . . . 825,549
Premises and fixed assets . . . . . . . . . . . . . . . . . . . . . . 375,086
Other real estate owned . . . . . . . . . . . . . . . . . . . . . . . 4,359
Investments in unconsolidated subsidiaries . . . . . . . . . . . . . 25,051
Customers' liability to this bank on acceptances outstanding . . . . 55,358
Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . 34,862
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 653,750
----------
Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,610,628
==========
LIABILITIES
Deposits:
In domestic offices . . . . . . . . . . . . . . . . . . . . . . . 5,946,262
Noninterest-bearing . . . . . . . . . . . . . . . 4,175,167
Interest-bearing . . . . . . . . . . . . . . . . . 1,771,095
In foreign offices and Edge subsidiary . . . . . . . . . . . . . 8,147,182
Noninterest-bearing . . . . . . . . . . . . . . . 44,817
Interest-bearing . . . . . . . . . . . . . . . . . 8,102,365
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge subsidiary . . . . . . . . . . . . . . . . . . 4,912,704
Demand notes issued to the U.S. Treasury and Trading Liabilities . . 423,324
Other borrowed money . . . . . . . . . . . . . . . . . . . . . . . . 386,049
Bank's liability on acceptances executed and outstanding . . . . . . 55,621
Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 530,536
----------
Total liabilities: . . . . . . . . . . . . . . . . . . . . . . . . . 20,401,678
==========
EQUITY CAPITAL
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,043
Surplus . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 177,736
Undivided profits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,003,171
----------
Total equity capital . . . . . . . . . . . . . . . . . . . . . . . . 1,208,950
----------
Total liabilities and equity capital . . . . . . . . . . . . . . . . 21,610,628
==========
</TABLE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Nader F. Darehshori
8
